(Bloomberg) -- Chinese stocks fell as investors responded to heightened trade tensions upon their return from a week-long holiday.
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The CSI 300 Index erased opening gains within minutes on Wednesday, its first trading session after the Lunar New Year holiday, to fall as much as 0.6%. The Hang Seng China Enterprises Index slumped more than 2% following a 3.5% jump in the previous session, with e-commerce firms leading losses.
What seemed like a mild open suddenly turned volatile following a report that US Postal Service is temporarily suspending inbound parcels from China and Hong Kong. That comes a day after Washington and Beijing slapped tariffs on each others’ exports. While hopes remain for an eventual deal that can defuse tensions, investors are reducing risk as uncertainty remains high.
The outlook for equities remains uncertain, hinging on further tariff developments as well as China’s economic recovery. US President Donald Trump said there’s no rush to talk to Chinese leader Xi Jinping, adding that he’ll speak at an appropriate time.
China’s services activity unexpectedly slowed while extending its monthslong growth streak, a private survey showed. Early indications suggest consumption picked up during the holiday period, with record box-office figures and stronger sales at electric vehicle makers, which also benefited from a state subsidy program. Yet earlier data showed residential home sales resumed falling last month.
“Sino-US rivalry seems to have ricocheted higher with tariffs and this parcel development,” said Kok Hoong Wong, head of institutional equities sales trading at Maybank Securities. “That’s offsetting the rather upbeat Chinese New Year domestic spending data.”
The CSI sub-gauge for info tech stocks outperformed, briefly rising more than 3%. Gains were led by tech companies that are seen to benefit from the cheaper artificial intelligence model by DeepSeek — a Chinese AI startup whose latest model has drawn awe for its competitiveness with world-leading AI bots.
Yuan Fixing
On the currency front, China extended its support for the yuan by setting its daily reference rate for the managed currency at a level stronger than 7.2 per dollar, as trade tensions with the US add to the depreciation pressure on the yuan. The central bank set the fixing at 7.1693 per dollar.