Chinese stocks and Hong Kong stocks fell during trading on Wednesday, under the pressure of renewed concerns about rising global interest rates, after US inflation data reinforced expectations that the Federal Reserve would continue monetary tightening, at a time when measures to support local markets tried to limit losses. In the currency market, the Chinese yuan maintained its relative stability against the dollar, despite the central bank adjusting its reference rate to the weakest level since late October.
The Shanghai Composite Index fell by 0.2 percent to 3,654.95 points, by the mid-session break, while the CSI 300 index of leading stocks fell by 0.3 percent.
In Hong Kong, the Hang Seng Index fell by 0.8 percent to 24,352.69 points, while the Hang Seng Technology Index fell by 1.4 percent, with investors continuing to be cautious about growth stocks that are sensitive to interest rate changes.
Despite the downward trend in major indices, some technology stocks achieved gains, supported by continued interest in companies related to artificial intelligence and communications infrastructure.
The "Chainext" index for emerging companies rose by 1 percent, while the "Star 50" index specializing in technology stabilized near its previous levels.
The communications sector topped the list of gainers, after the CSI Fifth Generation Communications Index rose by 3 percent during morning trading, and the shares of Zhongji Innolight, which specializes in manufacturing optical communications units, rose by 8.3 percent, continuing to benefit from the growing interest in data network components.
The varying performance of the sectors reflects the continued selectivity of investors, as some companies associated with advanced technology maintain their attractiveness, while the broader market faces pressures resulting from the rise in the cost of financing globally.
US inflation brings back interest concerns
Asian markets came under pressure after the US consumer inflation reading came higher than expectations, coinciding with tough statements from Federal Reserve officials. These developments prompted investors to increase their bets on raising US interest rates next December, which led to a rise in global bond yields and a strengthening of the dollar.
Nanhua Futures analysts said that the rise in US yields and the rise of the US currency are putting pressure on the valuations of Chinese stocks denominated in the yuan.
They explained that the recovery of the markets, during the recent period, was based mainly on local measures to achieve stability, and on a temporary decline in some external risks, but they warned of the limited strength and sustainability of these factors, expecting indices to continue trading within limited ranges in the near term, despite the relative improvement in investor sentiment.
Energy market fluctuations increased uncertainty, as oil prices rose on Wednesday after touching their lowest levels in two months during the previous session, amid varying expectations between the possibilities of calming the war with Iran and fears of continued attacks on ships in the Strait of Hormuz.
The yuan stabilizes despite the strength of the dollar
In the exchange market, the Chinese yuan recorded limited movements against the dollar, with investors balancing between the strength of the US currency and the signals issued by the People's Bank of China. The yuan was traded in the local market at about 6.6746 to the dollar, an increase of 0.09 percent, while its price in foreign transactions reached about 6.6736 to the dollar, an increase of approximately 0.04 percent.
Before the market opened, the central bank set the daily reference rate at 6.7191 yuan to the dollar, the weakest level since October 22, and 336 points less strong than Reuters estimates.
The Chinese trading system allows the yuan to move within a 2 percent band up or down around the daily reference rate.
In November, the central bank began setting weaker reference rates for the currency, after a year of continuous strengthening, in a move that traders interpret as an attempt to slow the pace of the yuan's rise.
Several Chinese banks also raised interest rates on dollar deposits to levels that in some cases exceed US yields, which may encourage the retention of the dollar and limit the gains of the local currency.
Markets await the Fed’s decision
Nanhua Futures analysts believe that the decline in consensus regarding the continued appreciation of the yuan has pushed the dollar exchange rate against the Chinese currency to move within a narrow range.
However, they pointed out that the strength of Chinese exports during October, and the continued large trade surplus, support the possibility that the general trend of the yuan’s appreciation will remain in place.
In the American markets, the Fed Watch tool, affiliated with the CME Group, showed that traders are 91.9 percent likely to raise interest rates by 25 basis points next month, compared to a 9.1 percent probability of an increase of 50 basis points.
These expectations reflect a shift toward a tighter US monetary policy, which may increase pressure on capital flows and asset valuations in emerging markets.
While the Chinese authorities are trying to maintain market stability and manage the yuan's gradual rise, the path of US interest rates and oil prices remain decisive factors in determining the direction of stocks and currencies in the coming weeks.
The credit rating agency Moody's raised its growth forecast for the Indian economy to 7 percent, compared to 6.5 percent previously, during the fiscal year ending in March 2027, driven by the broadening of the economic growth base and the country's ability to confront the energy supply shock resulting from the war in Iran.
The agency said that strong consumption, improved investment, and solid macroeconomic indicators would help India maintain a growth rate approaching 7 percent in the medium term, according to Reuters.
Moody's explained that India dealt with the shock of rising energy prices better than it had previously expected, benefiting from its ability to diversify sources of crude oil and gas supplies, as well as limit the transmission of the immediate impact of rising prices to consumers, through state-supported oil marketing companies and tax cuts.
The agency indicated that a group of economic indicators, including strong production of capital goods and increased imports, accelerating growth in credit directed to the industrial sector, and high rates of utilization of production capacity, indicate that the Indian economy may be on the cusp of a new cycle of private investment spending.
The Indian economy recorded growth of 7.8 percent on an annual basis during the quarter extending from April to June, exceeding expectations, supported by the investment boom and the strength of the manufacturing sector, in addition to the continued strength of consumer demand.
On the other hand, Moody's warned of a number of risks that may affect growth prospects, including expanding inflationary pressures, a weak southwest monsoon season, as well as the possibility that tightening monetary policy will delay the recovery of private investment.
The Central Bank of India raised interest rates in October for the first time in nearly four years, while markets currently expect monetary policy to tighten by an additional 90 basis points over the next twelve months.
Indian companies raise $3 billion in bonds
On the other hand, Indian companies are rushing to enter the bond market, after a sharp decline in yields provided an opportunity to borrow at a lower cost, ahead of the monetary policy review scheduled for December by the Reserve Bank of India, according to what five investment bankers said on Wednesday.
Bankers said that companies, including state-owned enterprises and non-banking finance companies, are preparing to raise about 280 billion rupees ($3 billion) through bond issues during the second half of November.
Prime Database data showed that companies raised about 350 billion rupees during the first ten days of November, after fundraising operations fell to the lowest level in six months, at 609 billion rupees, during October.
Nishchai Nath, founder and CEO of the “Bond Scanner” platform for electronic trading in bonds, said that the recent decline in yields provided borrowers with an opportunity that was not available in September and October, adding that a number of companies that postponed bond issuances or withdrew them when yields were high may now accelerate the implementation of those plans.
Benchmark bond yields for companies with a credit rating of “EEE,” according to data from the London Stock Exchange Group, fell by 30 basis points for three-year bonds and 35 basis points for five-year bonds since the beginning of this month, keeping pace with the decline in government bond yields.
But market participants warned that the opportunity to borrow at a lower cost may be short-lived, with expectations that both the Reserve Bank of India and the US Federal Reserve will raise interest rates during December.
The Reserve Bank of India raised the key interest rate to 5.50 percent in October and adopted a gradual approach to monetary tightening, indicating the possibility of further increases.
Venkatakrishnan Srinivasan, founder and managing partner of debt consulting firm Rockfort FinCap, said that Indian companies are increasingly turning to issuing three- and five-year bonds, given that the local debt market provides the lowest borrowing costs, adding that demand for long-term bonds will remain strong from large institutional investors.
Investment inflows to Indian gold and equity funds slow
In a related context, investments in gold exchange-traded funds in India declined by 22 percent during October, while flows to equity mutual funds also slowed, according to data from the Mutual Funds Association of India.
Net flows into gold exchange-traded funds fell to 34.74 billion rupees ($370.57 million) last month, while net flows into equity mutual funds fell by about 14 percent on a monthly basis, to 329.9 billion rupees ($3.52 billion).
In contrast, debt funds attracted net inflows of 1.13 trillion rupees during October, supported by short-term funds and liquidity funds, after this category recorded net withdrawals of 1.83 trillion rupees in September.
The "Singles' Day" shopping festival in China this year has turned into a broad test of the ability of artificial intelligence to stimulate consumption, with the spread of chatbots that help shoppers choose, compare and complete products, in addition to the increasing demand for games, smart robots, and paid artificial intelligence services.
At a time when Chinese e-commerce companies face intense competition and constant consumer caution, platforms such as Alibaba, JD.com, and BDD Holdings are betting on new technologies to boost sales and transform the shopping experience from the traditional search for products to a more interactive and personalized process.
From searching for products to completing the purchase
The “Taobao” and “Tmall” platforms, affiliated with the “Alibaba” group, provide tools supported by artificial intelligence to search for products, try on clothes virtually, and find appropriate discounts.
The task of the smart assistant is no longer limited to suggesting a commodity; He can now compare specifications, apply discount coupons, arrange deliveries, and even complete the transaction without the user needing to move between multiple applications.
Liu Xingliang, an independent technology analyst in Beijing, says that a consumer can, for example, ask a chatbot to find a washing machine that fits on a narrow balcony, runs quietly at night, and does not exceed a specific budget.
This reflects a shift in the way products are discovered, especially in China, where the dominance of comprehensive apps allows the integration of search, payment and delivery services into a single digital environment.
Smart assistants attract millions
JD.com announced that its smart shopping assistant, Dong Dong, attracted nearly 80 million users who requested advice during this year's festival, more than three times the number of users last year.
On Doyen, a platform for short videos and social commerce, links provided by chatbots contributed to about 5 percent of purchases during October, according to data from WBIC Marketing and Technologies.
This percentage exceeded 20 percent in some product categories that require research and comparison before purchasing, such as nutritional supplements.
Jacob Cook, CEO of the research company, said that shopping via smart assistants is still a new channel for product discovery, but he expects it to gradually occupy an increasing share of direct purchases, similar to shopping via live broadcast and social media platforms.
A boom in sales of smart devices and services
The impact of artificial intelligence has not only made shopping easier, but has extended to the products on offer themselves.
Alibaba announced that sales of games powered by artificial intelligence exceeded 100 million yuan, or about $15 million, within one year of launching a new commercial category on its platforms.
Among these products is an educational camera for children from Dr. Luke, which allows you to photograph a leaf or an insect and identify it, then provide a simplified explanation of its characteristics.
Sales of smart companion robots also increased by about five-fold during the second half of October, compared to the same period last year, according to Alibaba data, without disclosing the number of units sold.
In another indication of growing demand, Tmall announced that sales of paid use units for artificial intelligence models, known as “tokens,” increased by more than 700 percent during the period from October 15 to November 5, compared to the period from September 15 to October 5.
The famous shopping influencer, Austin Lee, was able to sell 100,000 monthly subscriptions to Alibaba’s “CoinWork” service within 30 minutes, after he demonstrated artificial intelligence products for the first time on his live broadcast.
Sales growth remains limited
Despite this technological momentum, it is not yet clear to what extent artificial intelligence can trigger a broad recovery in consumer spending.
Sinton platform data showed an increase in sales of the “Singles’ Day” festival by 2.4 percent during the period from October 7 to 31, with the final figures for the festival to be released on Thursday.
This increase comes compared to Chinese retail sales growth of 1.1 percent during the first nine months of the year.
“Singles’ Day” began as a one-day shopping event, before it turned into a festival extending for nearly a month, with the launch dates of the offers differing between platforms.
Ben Cavender, managing director of China Market Research Group in Shanghai, warned that increasing reliance on smart assistants may benefit brands over others, depending on platform recommendation mechanisms and product prices.
He explained that some companies may lose opportunities to appear in front of consumers if purchasing decisions become based on smart assistant recommendations instead of traditional search results.
While the practical applications of artificial intelligence in Chinese commerce expand, the most important test remains whether these technologies will succeed in increasing total spending, or will merely redistribute sales between platforms and brands.
