China Stocks Falter Amid Economic Uncertainty

China and Hong Kong stocks experienced a downturn due to cautious investors in the absence of new catalysts. The CSI300 and Shanghai Composite Indexes dropped, with earnings pressure expected in sectors like liquor and tech. However, Xpeng's shares surged on robotaxi model announcements.

On Tuesday, China and Hong Kong stocks saw a decline as investors proceeded with caution amidst a lack of new economic drivers. By midday, China's blue-chip CSI300 Index had dropped by 0.7%, while the Shanghai Composite Index was down by 0.4%. Meanwhile, Hong Kong's Hang Seng index recorded a 0.2% decrease.

Analysts from UBS project that China's economy will grow by 4.5% in 2026, experiencing a slight slowdown due to weak export performance. Despite this, domestic activities are likely to remain resilient. The property sector's downturn, while significant, is expected to ease gradually.

In the stock market, shares in the liquor sector fell by 0.8%, counteracting a previous 5% rally, while AI stocks dipped 1.6%. The baijiu industry recorded its highest quarterly earnings decline in a decade. In contrast, Hong Kong's Xpeng shares surged over 15% following robotaxi model announcements, and Ganfeng Lithium shares rose by 4.1% on positive developments in Argentina.

(With inputs from agencies.)