Hong Kong stock benchmark drops below 20,000, surrendering stimulus gains
Hang Seng Index falls to lowest point since September 25, erasing a policy-induced rally that had added as much as 27 per cent
Hong Kong’s stock benchmark fell below 20,000 for the first time since Beijing announced a large package of stimulus measures in late September. Data showed borrowing in mainland China slowed in October.
The Hang Seng Index fell 2.2 per cent to 19,982.30 at 1.15pm local time on Tuesday, bringing it to the lowest point since September 25 and erasing all gains from the policy-induced rally. The Tech Index dropped 3.1 per cent. The CSI 300 Index was unchanged, and the Shanghai Composite Index fell 0.3 per cent.
Aluminium producer China Hongqiao Group led losses, plunging 7 per cent to HK$13.26, while automobile dealer Zhongsheng Holding dropped 5.5 per cent to HK$17.90. Electric vehicle makers slumped: BYD by 1.5 per cent to HK$30.40 and Li Auto by 3.1 per cent to HK$92.60.
Alibaba fell 2.5 per cent to HK$91.70, while JD.com slid 2.8 per cent to HK$147.50. Later this week the e-commerce giants will share sales results from Singles’ Day – China’s busiest online shopping festival.
The Hang Seng Index gained as much as 27 per cent after Beijing announced a slew of measures to revive the economy on September 24. But a hoped for fiscal stimulus failed to materialise on Friday when the government unveiled a 10 trillion yuan ($1.40 trillion) debt package to ease local government financing strains. The package came as a disappointment to the market.
“Any positive catalyst looks absent after the disappointing stimulus announcement in China,” said Gary Ng, a senior economist at French investment bank Natixis. Investors are still sitting on the safe side and assessing the uncertainties in Trump’s policies and geopolitical risks between China and the US, he added.
Volatility in Chinese equities is expected to continue in the near term as investors trade on policies and await further potential fiscal stimulus, said Vivian Lin Thurston, portfolio manager for emerging markets growth at investment bank William Blair.
The latest stimulus package does not support consumption or restore consumer confidence, so these remain key areas for the government to address to jump start the economy, she said in a note on Tuesday.
Meanwhile China’s credit expansion slowed more than expected in October, data released by the People’s Bank of China on Monday showed. Chinese banks extended 500 billion yuan ($69.51 billion) in new yuan loans in October, well below the expectation of 700 billion yuan among analysts polled by Reuters.
Other major Asian markets also fell. Japan’s Nikkei 225 retreated 0.4 per cent, and South Korea’s Kospi dropped 1.2 per cent while Australia’s S&P/ASX 200 lost 0.2 per cent.