Staff of Reuters 3 Minutes to Read (Reuters) – SHANGHAI, July 14 – After two days of gains, China equities dipped on Wednesday, as investors’ focus shifted to escalating Sino-US tensions as the optimism about policy easing faded. ** Hong Kong stocks fell amid a dismal mood across Asian markets, as the greatest increase in US inflation in 13 years sparked fears of a faster-than-expected monetary tightening in the United States. ** By lunchtime, the CSI300 index had dropped 0.9 percent to 5,095.67 points, while the Shanghai Composite Index had dropped 0.8 percent to 3,537.26 points. The Hang Seng index in Hong Kong fell 0.6 percent. ** The central bank’s surprise drop in banks’ minimum reserve ratio (RRR) published late Friday boosted mainland Chinese stocks earlier this week. On Tuesday, the People’s Bank of China said the move had not changed its conservative monetary policy stance. ** Ting Lu, Nomura’s Chief China Economist, stated that the 50-basis-point RRR decrease and fiscal stimulus “are unlikely to be adequate to reverse the growth downtrend, since the drag from the slowing property sector is too strong to fully counterbalance.” Meanwhile, the US administration reiterated its cautions to firms on Tuesday about the growing dangers of having supply chain and investment ties to China’s Xinjiang region, citing forced labor and human rights violations there. ** Bill Witherell, chief global economist at Cumberland Advisors, said, “I am waiting for any hint that a serious correction is coming.” “It’s possible that deteriorating China-US financial relations will lead to one.” ** Lynda Zhou, a Shanghai-based fund manager at Fidelity International, predicted rising volatility in China’s onshore stock market and warned against the negative impact of an expected U.S. tapering. ** China’s financial stocks fell nearly 2%, as investors worried that government efforts to lower real lending rates, combined with slowing economic growth, would hurt margins. BYD, an electric vehicle manufacturer, fell 5.8% and 4.9 percent in China and Hong Kong, respectively. (Shanghai Newsroom contributed reporting; Vinay Dwivedi edited the piece.)/n
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