Global Market: China, Hong Kong stocks fall as rate hike fears weigh on sentiment

China and Hong Kong stocks fell on Friday, putting the markets on course for weekly losses as thin trading volumes and rising expectations of further U.S. interest rate hikes weighed on investor sentiment, Reuters reported.

China's blue-chip CSI300 index fell 1.6% by the lunch break, while the Shanghai Composite Index dropped 1.8% to below the 3,900-point level. In Hong Kong, the benchmark Hang Seng Index declined nearly 1%.

For the week, the CSI300 was down 1.6%, while the Hang Seng had lost 3.5%.


Read more: Global Market: Japan's Nikkei falls 3% as oil surge, US rate hike fears weigh

Liquidity dries up
Market sentiment in mainland China has weakened over the past month as investors booked profits following a record-setting rally driven by artificial intelligence stocks earlier this year.

Trading activity has also weakened, with daily turnover in onshore equities hovering near its lowest level of the year this week. The reduced liquidity has added to pressure on stocks as investors have become more cautious about valuations and the broader economic outlook.

The technology-heavy STAR50 index fell 3%, touching its lowest level since late April.

Read more: Global Market Today: Asian stocks, bonds fall on oil, inflation concern

Metals slide, oil stocks gain
Non-ferrous metal stocks led declines in mainland markets, falling more than 6% as prices for metals broadly weakened. Zijin Mining Group dropped 7.3%.

The broader selloff was offset in part by gains in oil stocks. PetroChina rose 1.2% as energy shares benefited from stronger crude prices.

Hong Kong-listed technology majors also declined, with the sector falling 0.8%.

Fed hike expectations rise
Investor sentiment was further pressured by growing expectations that the U.S. Federal Reserve could raise interest rates again.

U.S. producer prices increased in August, driven by higher costs for goods, airline fares and hospital services. The data reinforced concerns that inflationary pressures could remain elevated, increasing the prospect of tighter monetary policy.

According to Reuters, the combination of higher U.S. rate expectations, weaker liquidity and fading momentum in Chinese equities has weighed on risk appetite across regional markets.

Enflame surges in Shanghai debut
Despite the broader market weakness, Shanghai Enflame Technology surged about 200% in its Shanghai debut on Friday.

The Chinese artificial intelligence chipmaker, backed by Tencent, raised 6.12 billion yuan ($912 million) through its initial public offering. The strong debut highlighted continued investor appetite for selected AI-related companies even as broader Chinese technology stocks came under pressure.