Metals Decline and Profit-Taking Pressure Chinese Stocks Despite Ongoing Monthly Gains

Beijing | EcoPulse24

Chinese stocks closed the week lower, weighed down by a sharp fall in metals prices and profit-taking following a strong rally. Nevertheless, the main indices remain on course for monthly gains, buoyed by expectations of further policy support and progress in artificial intelligence technologies.

On the pricing front, the Shanghai Composite Index dropped about 1% to below 4,120 points, while the Shenzhen Composite fell 1.7% to around 14,040 points. The decline was driven by heavy losses in mining stocks following drops in gold, silver, copper, and other metals prices, as investors locked in profits after recent record highs.

Mining companies saw notable losses, with Zijin Mining down 8.4%, Tongling Nonferrous Metals falling around 10%, China Northern Rare Earth dropping 9.2%, and both CMOC Group and Aluminum Corp each down 9.9%.

Despite the daily pressures, the Shanghai and Shenzhen indices are still on track for monthly gains exceeding 3% in January, supported by expectations of additional stimulus from policymakers and ongoing momentum in AI and related technology shares. Conversely, local stocks faced added pressure at month-end amid increased regulatory scrutiny targeting speculative trading activities.

In Hong Kong, stocks fell by about 412 points or 1.5% to 27,545 in early trading, ending a seven-session winning streak. The pullback was driven by profit-taking after the market hit its highest level in over four and a half years and by caution ahead of China's official PMI data. Sentiment was also affected by a steep drop in U.S. equity futures after Wall Street closed weak and warnings of margin pressure.

Hong Kong-listed metals stocks also saw clear declines, including Zijin Gold International down 6.9% and Zhaojin Mining down 4.1%, while Kuaishou Tech dropped around 2.9%. Still, Hong Kong stocks are set for a third consecutive weekly gain and their first monthly advance in four months, rising about 8%, supported by signs of real estate market stabilization and eased financing restrictions following reports of the removal of monthly debt ceiling requirements since 2020.

EcoPulse24 Analysis:
The current pressures on Chinese stocks appear tied to a natural correction cycle after strong gains, particularly in metals-related sectors that previously led the rally. Despite the sharp daily declines, indices maintaining monthly gains reflects ongoing confidence in policy support and technological transformation. The balance between tighter regulation on speculation and looser real estate financing remains a key factor for market direction, as investors await further signals from economic data and government policies.