China & Hong Kong Stocks Slip as Middle East Conflict Intensifies

Mainland China and Hong Kong stocks fell on Friday amidst regional uncertainty due to escalating conflict in the Middle East. As tensions mount, investors anticipate prolonged turmoil and higher oil prices. Despite the volatility, analysts see Chinese equities as a strong long-term investment option.

Mainland China and Hong Kong stocks experienced a downturn on Friday, continuing a regional decline as the Middle East conflict neared its two-week duration with no immediate resolution. Investors are wary of an extended conflict and rising oil prices, particularly as Iran escalated attacks across the Middle East after a pledge from its new supreme leader, Mojtaba Khamenei, to keep the Strait of Hormuz closed.

The Shanghai Composite index showed a midday decrease of 0.22%, while the CSI300 Index dipped slightly by 0.02%. In contrast, the SSEC was expected to see a marginal weekly loss, whereas the CSI300 was on track for a slight weekly gain, suggesting a mixed outlook. James Wang from UBS highlighted Chinese equities as a diversification prospect for global investors due to China's higher oil reserves and lower overall oil dependency, providing some protection to A-shares.

Meanwhile, Hong Kong's Hang Seng Index fell by 0.48%, with technology shares dropping by 0.41%. Analysts from Morgan Stanley emphasized China's resilience amid the Iranian conflict, noting a preference for A-share markets over offshore options and advising a targeted stock-picking approach, particularly in sectors aligned with real assets and innovation. As events unfold, investors are anticipating China's February credit data and other economic indicators for insights into domestic economic conditions.

(With inputs from agencies.)