The Chinese stock market continued its decline on September 2, following a drop the previous day. The surge in international oil prices contributed to the negative sentiment. The Shanghai Composite Index closed down 0.97% at 3,941.39, the Shenzhen Component Index fell 1.88% to 13,611.55, and the ChiNext Index dropped 2.39% to 3,312.24.
Tensions in the Strait of Hormuz escalated as the United States resumed airstrikes against Iran, prompting retaliatory attacks from Iran. This situation led to a significant increase in international oil prices, with West Texas Intermediate (WTI) rising 5.2% to $90.22 on September 1, and Brent crude climbing 4.6% to $94.65. Chinese media expressed concerns that global inflation could reignite.
Additionally, the yield on the U.S. 10-year Treasury note surpassed 4.8%, with bond yields in major countries like Japan, the UK, and Germany reaching their highest levels in recent years. Chinese media described this as a 'global bond market sell-off.' Rising bond yields diminish the relative attractiveness of stocks, particularly growth and technology stocks that have high valuations.
Huatai Securities noted in a report that the U.S. Federal Reserve is leaning towards a hawkish stance, and the inflow of foreign active funds into China has decreased. They assessed that the potential for sustained growth in the Chinese stock market has somewhat diminished.
On the other hand, defense companies saw significant gains. Companies such as Inner Mongolia First Machinery Group, China National Chemical Engineering, and China Aerospace Science and Industry Corporation hit their daily price limits. The combined revenue of over 80 defense firms listed in China reached 377.4 billion yuan in the first half of the year, an 18.9% increase compared to the same period last year, while net profits totaled 24.7 billion yuan, up 32.9%. This confirms that the defense sector is experiencing substantial growth, with reports indicating that Chinese defense companies are expanding their overseas exports.
The power grid sector also showed strength, with companies like Taiyang Cable and Shenma Electric reaching their daily price limits. The National Energy Administration of China held a meeting on September 1 to discuss new power grid construction, focusing on accelerating research and development of new technologies in areas such as artificial intelligence, flexible power grids, smart grids, and energy storage systems (ESS), along with announcing more supportive policies.
Meanwhile, the People's Bank of China set the yuan's central parity rate against the dollar at 6.7829 yuan, a 0.0020 yuan increase from the previous day, reflecting a 0.03% decline in the yuan's value.
* This article has been translated by AI.
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