Chinese stocks near 2023 low as reopening crackles

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Chinese stocks erased their gains for the year on growing concerns about the country’s economic outlook and the possibility of an unprecedented US debt default.

China’s benchmark CSI 300 index of shares listed in Shanghai and Shenzhen fell as much as 1% on Wednesday, pushing the index’s year-to-date losses to 2% when factoring in the depreciation of the renminbi against the dollar. In Hong Kong, the Hang Seng China Enterprises Index fell as much as 1.6%.

The latest losses for Chinese stocks follow disappointing economic data suggesting the country’s recovery from suffocating zero-Covid restrictions has started to stall. Official data this month showed record unemployment among Chinese youthwith one in five unemployed.

“Most investors aren’t sure about China’s market prospects,” said Dickie Wong, head of research at Kingston Securities in Hong Kong. Wong said the Chinese government “can’t really do anything at the moment about youth unemployment.”

“Teenagers don’t want to work in the countryside or in factories, they want to work in Alibaba or Tencent,” he added, “but Chinese tech companies are reducing their workforce now.”

Shares of Alibaba fell 1.6% on Wednesday after the company announced it was cutting 7% staff at its cloud business.

Elsewhere in the region, Japan’s Topix, which hit its highest point since 1990 this month, fell 0.3% and Australia’s S&P/ASX 200 fell 0.5%.

The losses in Asia-Pacific stocks came on the heels of a sell-off on Wall Street after politicians in Washington failed to clinch a deal to raise the debt ceiling, with less than two weeks before state governments United was due to default.

A lack of tangible progress since talks between US President Joe Biden and Republican House Speaker Kevin McCarthy pushed the benchmark S&P 500 index down 1.1%, while the tech-focused Nasdaq Composite lost 1.3%.

In currencies, the New Zealand dollar fell as much as 1.3% against the US dollar after the country’s central bank raised its key interest rate by 0.25 percentage point but appeared to rule out further rate hikes.

“Following the RBNZ’s updated forecast for the official cash rate, the Bank has already finished tightening,” economists at Capital Economics wrote in a note following the bank’s decision to hike rates to 5.25%.

Futures markets pushed the FTSE 100 down 0.4% on the open, while the S&P 500 is expected to rise 0.1% when trading begins on Wall Street later in the day.