China, HK stocks drop on Covid-19 flare-ups; energy shares tumble

China, HK stocks drop on Covid-19 flare-ups; energy shares tumble
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SHANGHAI (July 6): China and Hong Kong stocks dropped on Wednesday (July 6) as the country continued to grapple with Covid-19 flare-ups, while energy shares tracked a sell-off in the global oil market.

The blue-chip CSI 300 Index lost 1.3% by lunch break, while the Shanghai Composite Index also fell 1.3%. In Hong Kong, the benchmark Hang Seng Index weakened 1.4%.

China is fighting a Covid-19 resurgence on multiple fronts across the country, including an emerging cluster in Shanghai, spurring mass testing drives and fresh restrictions. 

Shanghai, which lifted its two-month lockdown in early June, is testing all residents in nine of its 16 districts from Tuesday to Thursday as well as those in parts of three other districts.

"Flare-ups in places like Shanghai and Anhui contributed to the stock market weakness," said Zhiwei Zhang, the president and chief economist of Pinpoint Asset Management.

However, he pointed that the market had expected the possible increase in infections, so there were no signs of panic selling.

Zhang also predicted higher volatility ahead as the pace of China's economic recovery will likely slow.

Energy shares tumbled more than 5% in both China and Hong Kong after a slump in global oil prices amid fears of an economic recession.

Most sectors fell in both markets.

China's property shares dropped 3.6%, while resources shares fell 2.9%.

Tech shares were the only bright spot on the mainland, with the tech-focused STAR50 Index rising 1.3%, led by chipmakers.