Hong Kong stocks cautious, awaiting policy support after China data disappoints
- Investors hope for more policy support after weak economic data and remain cautious over trade tensions as China orders anti-dumping probe into EU pork imports
Hong Kong stocks declined on Tuesday as investors awaited increased policy support from Beijing amid China’s sluggish economic data and trade frictions with the European Union.
The Hang Seng Index dipped 0.1 per cent to close at 17,915.55, after surging as much as 0.6 per cent earlier in the day. The Hang Seng Tech Index fell 0.3 per cent but the Shanghai Composite Index advanced 0.5 per cent.
Despite the weak credit and property investment numbers, the People’s Bank of China (PBOC) kept the one-year medium-term lending facility rate unchanged on Monday, triggering hopes Beijing will inject more support for the economy later in the year.
“The latest economic data released was worse than expected, with only retail sales showing a slight improvement,” said Dickie Wong, executive director at Kingston Securities. “The Chinese real estate market continues to face downward pressure in the near term.”
Analysts believe that these challenges will eventually push the Chinese government to act.
“PBOC will absolutely have to ramp up policy support in the second half of 2024,” said Carlos Casanova, economist at UBP. “The support may or may not be in the form of rate cuts. They can still use RRR [reserve ratio requirement] cuts and there’s a real need to expand the home purchasing programme.”
To facilitate destocking, the PBOC may “increase the size of the relending facility and lower the interest rate”, according to Wang Tao, chief China economist at UBS, and the timing for more policy support measures could be around or after the July Politburo meeting.