China Stocks fall on risk of US-China tensions rising

Mainland China share market finished session lower on Monday, 06 February 2023, as profit taking continued amid weak corporate earnings outlook and heighten US-China tensions in response to the Pentagon's discovery of an alleged Chinese spy balloon, that was later shot down and provoke new sanctions against Chinese companies.

At close of trade, the benchmark Shanghai Composite Index fell 0.76%, or 24.71 points, to 3,238.70. The Shenzhen Composite Index, which tracks stocks on China's second exchange, was down 0.84%, or 18.10 points, to 2,145.19. The blue-chip CSI300 index sank 1.32%, or 54.75 points, to 4,086.88.

Over the weekend, U.S. Secretary of State Anthony Blinken postponed his visit to Beijing in a sign of a potential re-escalation of tensions between the United States and China after the U.S. military shot down a suspected surveillance balloon from China. China said it was a stray civilian vessel blown off course, and has vowed to retaliate.

 

The US has recently moved to limit China's access to advanced semiconductor technology by restricting US companies from exporting their hi-tech goods to mainland China. It has also roped in allies Japan and the Netherlands to restrict the sale of advanced equipment.

CURRENCY NEWS: China's yuan strengthened against the dollar on Monday, despite softer mid-point fixing by China's central bank. Prior to market opening, the People's Bank of China (PBOC) set the yuan's midpoint rate CNY=PBOC at 6.7737per dollar, weaker than the previous fix of 6.7382. In the spot market, the onshore yuan CNY=CFXS was changing hands at 6.7810 by midday, 192 pips stronger than the previous late session close.

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