Hong Kong stocks sink to a 5-week trough as China data points to patchy economic recovery
- China’s economy grew by a consensus-beating 5.3 per cent in the first quarter of 2024, but retail sales and industrial output data missed economists’ estimates
- The property market remained subdued with new home prices falling 0.34 per cent in March from the previous month, the 10th straight month of decline
The Hang Seng Index retreated 2.1 per cent to 16,248.97 at close on Tuesday, hitting the lowest level since March 7. The Tech Index fell 3 per cent, while the Shanghai Composite Index tumbled 1.7 per cent.
All but three of the 82 index members declined. E-commerce group Alibaba Group slipped 3.3 per cent to HK$68.05 and peer JD.com declined 2 per cent to HK$99.15. Macau casino operator Sands China tumbled 5.8 per cent to HK$19.72 and peer Galaxy Entertainment lost 4.9 per cent to HK$36.80.
However, retail sales growth slowed to 3.1 per cent in March year on year, lagging the 5.5 per cent growth in January and February combined, and industrial output rose by 4.5 per cent last month. Both readings missed economists’ estimates.
“While China’s headline GDP figure offered a glimmer of optimism, the underlying weakness in domestic demand and industrial activity suggests that challenges persist for the world’s second-largest economy,” said Stephen Innes, managing partner at SPI Asset Management. Investors remain cautious amid uncertainties surrounding the pace and sustainability of China’s economic recovery, he added.
Investors are also paring back expectations of monetary easing after the GDP data surprise. “The strong first quarter growth will make the government comfortable with the current policy stance,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. With the Fed rate cut probability declining, the chances of a rate cut by the People’s Bank of China are also diminishing, he added.
The Hang Seng Index has declined 5.2 per cent since its peak on April 10, giving up some of the 14 per cent gain made since late January, fuelled by Beijing’s stimulus package. That brings the loss this year to 4.7 per cent, taking Hong Kong into the global ranks of the worst performing major markets.
Other key Asian markets declined, following the overnight retreat in the US market. Japan’s Nikkei 225 tumbled 1.9 per cent, Australia’s S&P/ASX 200 lost 1.8 per cent, while South Korea’s Kospi lost 2.3 per cent.
