Hong Kong stocks cautious, awaiting policy support after China data disappoints
Hong Kong stocks eased at the noon trading break 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 0.2 per cent to 17,903.06 at noon local time. The Hang Seng Tech Index fell by the same margin but the Shanghai Composite Index advanced 0.4 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.
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“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.
In a boost for trading liquidity, Hong Kong will see trading continue as normal during typhoons and torrential rains from September 23, scrapping the more than 70-year-old practice of halting trade during bad weather, according to the city’s government on Tuesday.
Photo shows the Zijinshan copper mine owned by Zijin Mining Group in south China’s Fujian province. Photo: AP
Investors remained cautious after China announced an anti-dumping investigation into certain pork products imported from the EU on Monday, following the EU’s decision last week to raise tariffs on Chinese EVs by up to 38 per cent from July 4.
Warren Buffett’s Berkshire Hathaway cut its stake in Chinese EV maker BYD ahead of the tariffs, reducing its holding to 6.9 per cent from 7 per cent. BYD edged down 0.1 per cent to HK$233.2.
Shares of Zijin Mining Group topped the turnover list, falling 2.6 per cent to HK$15.90 after its proposed sale of a combination of convertible bonds and shares to raise US$2.5 billion, according to the company’s filing on Tuesday. The stock decline is in anticipation of selling by convertible arbitrage hedge funds who seek profits based on the pricing discrepancy between a company’s convertible bonds and its underlying stock.
Zijin’s convertible bonds offering followed a series of similar issuances from Chinese technology companies to take advantage of the cheaper borrowing costs of such instruments compared with traditional bond sales when interest rates are elevated.
“More convertible issuance should come from Chinese firms,” said S&P Global Ratings credit analyst Clifford Kurz in a note on Monday. “While we view the instruments as fully debt and thus as immediately credit negative, longer term they could be credit positive, if conversion kicks in.”
Wuhan Youji Holdings, which makes toluene derivative products, jumped 80 per cent from its initial public offering price (HK$5.50) to HK$9.9 on its trading debut in the city.
Other major Asian markets were broadly higher. Japan’s Nikkei 225 rose 0.9 per cent and South Korea’s Kospi added 1.0 per cent, while Australia’s S&P/ASX 200 advanced 1.0 per cent.
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