Auto Sector Struggles Weigh Down Chinese and Hong Kong Shares

Shares in China and Hong Kong faced a downturn on Tuesday, primarily driven by significant losses within the auto sector amid heightened regulatory and consumer scrutiny. The blue-chip CSI300 Index of China recorded a 0.6% fall at midday, while the Shanghai Composite Index slipped by 0.3% and Hong Kong's Hang Seng saw a 0.2% decline.

Key among the declining stocks were Chinese automakers, who continued their downward trend after reports emerged about the country's commerce ministry planning to hold talks with industry leaders such as BYD and Dongfeng Motor. This meeting aims to address the trend of 'used cars' being sold without having been driven, creating substantial market confusion.

The auto industry's challenges intensified as the Hang Seng Automobile Index plunged over 2%, with BYD shares dropping nearly 4% following a previous 9% decline on Monday. Meanwhile, despite an uptick in industrial profits in April hinting at economic resilience, the sector remains under pressure from fierce price competition and warnings of its unhealthy state.

(With inputs from agencies.)