Chinese equities declined on Wednesday as investors returned from the Lunar New Year holiday to renewed trade tensions between Beijing and Washington.
The CSI 300 Index, which initially gained 0.7% at the open, quickly reversed course, falling 0.3% within minutes. Meanwhile, the Hang Seng China Enterprises Index dropped more than 1%, erasing part of the 3.5% rally seen in the previous session.
The cautious market response reflects persistent investor concerns over the escalating tariff dispute between the world’s two largest economies. While hopes remain for a resolution, uncertainty continues to drive risk aversion. U.S. President Donald Trump reiterated that he is in no hurry to engage in talks with Chinese President Xi Jinping, stating that discussions will occur “at the appropriate time.”
The broader outlook for Chinese equities remains uncertain, dependent on both trade negotiations and domestic economic recovery. A private survey revealed that China’s manufacturing activity unexpectedly contracted for a second consecutive month in January. Additionally, residential property sales continued to decline, further weighing on investor sentiment.
However, there are signs of resilience in consumer spending. China’s box office hit a record $1.3 billion in revenue over the Lunar New Year period, suggesting a potential rebound in domestic consumption.
“U.S.-China trade relations remain a key risk factor,” said Kenny Wen, head of investment strategy at KGI Asia Ltd. “If the newly imposed tariffs and retaliatory measures are delayed, markets could benefit. However, there is still a possibility of renewed escalation.”
As investors navigate these uncertainties, market volatility is expected to persist, with sentiment hinging on the next moves in the ongoing trade dispute.
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