China stocks retreat from four-week high as market weighs earnings setback, geopolitical risks

Iris Ouyang
·3-min read

Stocks in mainland China declined on Tuesday after a rally to the highest level in four weeks amid signs of earnings slowdown and rising geopolitical tensions.

The CSI 300 index, which tracks the biggest companies on Shanghai and Shenzhen bourses, retreated 0.4 per cent to 5,140.34 as trading resumed after a public holiday on Monday. The gauge climbed 2.45 per cent last week, also the biggest weekly advance since February 12, according to Bloomberg data.

The Shanghai Composite Index was little changed at 3,482.97. The gauge jumped 1.9 per cent last week, the most since a five-day ending February 12, recouping all the losses in 2021. Markets in Hong Kong will reopen on Wednesday.

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About one-third of the 1,500-plus members of the Shanghai Composite Index have published their annual reports, with earnings trailing analysts’ estimates by 14 per cent, according to Bloomberg data. Profits fell by an average 8 per cent from a year earlier.

“The stock market is readjusting after the strong rally last week,” said Liu Chenming, co-chief strategist at TF Securities. “The first half of April, when forecast reports for first-quarter results will be released, is a rebound window. In a medium term, we will see more digestion on stock valuation.”

A private economic report today showed Caixin China PMI Composite rose to 53.1 in March, up from the 51.7 in February. A services index rose 2.8 percentage points to 54.3.

China and US sent warships into disputed waters in the East and South China seas, after Chinese navy group the Liaoning passed the waterway between Okinawa and Miyako Island on Saturday morning. Japan also sent destroyer and patrol aircraft to monitor and gather information.

Tourism and catering stocks led losses on Tuesday, after chalking up gains over the past several weeks. China Tourism Group Duty Free Corp declined 4.9 per cent after a four-week rally. Jiangsu Tianmu Lake Tourism dropped 6.9 per cent after soaring 51 per cent since mid-January.

Steel producers gained as billet prices surged on ongoing concerns China’s tightening environment protection measures will crimp output. Liuzhou Iron & Steel surged by 6.8 per cent to 6.91 yuan. Lingyuan Iron & Steel gained 7.4 per cent to 2.75 yuan.

Four stocks rallied on their first day of trading. In Shanghai, Suzhou Gyz Electronic Technology almost tripled. In Shenzhen, Suzhou Huaya Intelligence Technology, Shandong Sino-Agri United Biotechnology and Zhejiang Truelove Vogue all rose by 44 per cent.

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