China’s Tech Hub Slump Recedes After Regulator Dismisses Report

(Bloomberg) -- Large-cap Chinese stocks rose Tuesday afternoon while gauges in the tech hub Shenzhen crawled back from sharp early losses.

The CSI 300 Index rose 0.3 percent as of 1:54 p.m. local time, having earlier slipped 1.1 percent. The Shenzhen Composite Index was down 1 percent, an improvement from the morning when it tumbled the most in a month with at least 20 companies retreating by the 10 percent daily limit.

The declines pared after China’s securities regulator dismissed a local media report that said newly-appointed Chairman Yi Huiman would prioritize the introduction of short-selling tools in 2019. The bulk of the morning losses occurred at around 10 a.m., half an hour after the open.

Traders had attributed the morning losses to criminal charges filed Monday by the U.S. against Huawei Technologies Co. U.S. prosecutors allege the Chinese company stole trade secrets from an American rival and committed bank fraud by violating sanctions on doing business with Iran, according to the charges.

The move increases tensions between the world’s two largest economies, which are already mired in a trade dispute that battered Chinese stocks last year. Optimism had been building that an agreement can be reached, with a Chinese delegation led by Vice Premier Liu He now in Washington for the latest round of high-level talks on the matter.

“The U.S. government’s accusations against Huawei are hurting tech and telecom stocks,” said Shen Zhengyang, a Shanghai-based strategist with Northeast Securities Co. “ChiNext and many Shenzhen-listed firms already faced earnings pressure thanks to the economic slowdown.”

Greasing the losses was the Shenzhen Composite’s failure to hold above its 50-day moving average this week, a level that’s been a key resistance for most of the past year.

The Shenzhen Composite is up 2.7 percent this month after a 33 percent loss in 2018, the worst year since the global financial crisis. Infotmic Co. and Henan Tong-Da Cable Co. were among stocks limit-down Tuesday. The ChiNext Index of smaller companies fell 1.1 percent, after earlier retreating 2.4 percent.

©2019 Bloomberg L.P.