China stocks see-saw near 2-year lows as Shanghai extends lockdown

China stocks recorded their biggest weekly drop in six weeks on Friday and the yuan extended losses as strict COVID-19 lockdowns paralysed economic activity in many big cities, even as authorities vowed to provide more help to hard-hit firms.

Shanghai authorities doubled down on their offensive against the virus, launching another round of city-wide testing and warning residents their three-week lockdown would only be lifted in batches once transmission is stamped out. The CSI300 index ended the day 0.38% higher at 4,011.12 points, after slumping as much as 1.1% earlier, while the Shanghai Composite Index closed 0.21% higher at 3,086.17.

But both indexes posted their biggest weekly losses since early March and remained near two-year lows, having erased almost all gains made following Vice Premier Liu He's pledge on March 16 to support the economy and financial markets. In Hong Kong, the benchmark Hang Seng was down 0.18% in late afternoon trade while the Hong Kong China Enterprises Index edged 0.2% higher.

"China's financial market is not immune to the external shocks and the domestic COVID-19 situation is also putting more downward pressure on growth," People's Bank of China (PBOC) Governor Yi Gang said in a video speech to the annual Boao Forum for Asia. China will continue to support the economy, and monetary policy will focus on supporting small firms and sectors hit by COVID outbreaks, Yi added.

That support may be increasingly necessary as COVID-related curbs drag on. "Rather than a rapid dropping of COVID restrictions, China looks to be headed for a slower, more gradual and more cautious reopening, a trajectory that implies disruptions to consumption and economic activity will persist beyond April," Ernan Cui, an analyst at Gavekal Dragonomics said in a note.

China's top securities regulator said on Thursday the economy remained healthy despite numerous challenges, asking institutional investors to invest more in equities to help limit short-term market fluctuations while contributing to economic restructuring. On the same day, the government launched its first private pension scheme that will potentially channel more long-term money into the stock market.

In China, real estate developers surged 2.4%, and banks added 1.7%, while shares in semiconductors and tourism were down 2.7% and 1.3%, respectively. Adding to investor uncertainty around listed Chinese firms that has weighed on share prices, the U.S. Securities Exchange Commission on Thursday added 17 companies, including Chinese names Li Auto, Ke Holdings and Zhihu Inc , to the latest batch of stocks potentially facing delisting from the United States.

China's securities watchdog is holding regular talks with U.S. regulators over audit cooperation and expects a deal soon, the vice chairman of the securities regulator said on Thursday. "There is no incremental information from the moves by U.S. regulators, which are normal procedures following domestic laws and the Holding Foreign Companies Accountable Act (HFCAA)," said Bruce Pang, head of research and macro strategy at China Renaissance Securities (HK).

Pang added the uncertainties are now left to the U.S. side, "considering the mid-term elections and geopolitical tensions, uncertainties remained high in the future." Li Auto dropped 2.6% in Hong Kong, while Zhihu slumped more than 20% in its Hong Kong debut.

In the currency market, China's yuan extended losses against the dollar and looked set for its worst week in more than 2-1/2 years on a combination of vanishing Chinese yield premiums and concerns over the country's economic outlook. The yuan's sharp drop has prompted speculation that authorities are encouraging a weaker currency to counter slowing growth.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)