(Updates to market close)
HONG KONG, Feb 8 (Reuters) - China and Hong Kong stocks ended lower in thin trade on Wednesday as the ongoing U.S.-China balloon spat weighed on sentiment, while some investors waited for more proof of economic recovery.
** China’s blue-chip CSI 300 Index dropped 0.44%, while the Shanghai Composite Index was down 0.49%.
** Hang Seng Index dipped 0.07% and Hang Seng China Enterprises Index declined 0.59%.
** Asian equities jumped, while the dollar was on the backfoot after less hawkish than feared comments from Federal Reserve Chair Jerome Powell lifted sentiment and fuelled investor hopes the central bank may soon ease monetary policy.
** U.S. Senate Democratic leader Chuck Schumer said relations with China were strained and the Joe Biden administration is looking at other actions it can take after shooting down what it called a Chinese surveillance balloon over the weekend.
** Meanwhile, China declined a U.S. request for a phone call between defense chiefs, a Pentagon spokesperson said on Tuesday.
** China markets lost steam in February after a rapid rally last month. “Market focus is switching from policy change to substantial improvement of fundamentals,” CICC analysts wrote in a note.
** Valuations of CSI 300 still have room to grow, but there is some short-term profit-taking pressure, they added. CSI 300 jumped 5.8% this year.
** Tao Wang, head of China economic research at UBS Investment Bank said in a note that Chinese households excess savings may not be released completely and very fast in 2023.
** “Some households may need to continue saving more for longer to restore their balance sheets that were damaged by the economic weakness and property downturn previously,” she said.
** Media and semiconductor stocks dropped 2.1% and 1.2% respectively, while real estate companies were up 0.4%
** In Hong Kong, food delivery giant Meituan plunged 6.5% to a two-month low after TikTok’s Chinese version Douyin is reportedly plans to offer its food delivery service in more Chinese cities, raising worries on intensified competition.
** Baidu retreated 3.1% after a 15% jump on Tuesday as it plans March launch of their ChatGPT-like AI chatbot called Ernie Bot. (Reporting by Summer Zhen; editing by Uttaresh.V)
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