Weak Earnings Outlook and Piecemeal Policy Response Drag China Indexes Down, Hang Seng Drops 5%

Li Chen
24 May, 2024
Hong Kong

Benchmark indexes in Shanghai and Hong Kong traded down in Friday's trading and extended weekly losses amid a lack of economic catalysts and widespread disappointment with earnings growth. 

Market indexes fell for the fourth day in a row on the worry that the latest policy measures announced by regulators and the People's Bank of China are not likely to be enough to revive the property market. 

Moreover, weak earnings from industrial companies, technology leaders, capital equipment makers, and electric vehicle makers suggested continued price pressure and elevated costs. 

Market indexes in Hong Kong and Shanghai dropped more than 0.7% after stocks of technology companies and property developers fell on worries of higher interest in staying longer in the U.S. 

The U.S. Federal Reserve's latest policy meeting minutes showed that policymakers are unhappy with the lack of progress on inflation in recent months. 

Moreover, policymakers said more solid evidence is needed that inflation is on a sustained path towards the 2% target level before rate cuts are put in place. 

The three-month market rally appears to have lost its momentum following the earnings growth weakness and lack of additional buying by state-controlled financial institutions. 

The Hang Seng market index is down 5% in the week and up 11% in the year so far, and the CSI 300 index is down 2.5% and up 7.0%, respectively. 

 

China Indexes and Movers 

The CSI 300 index declined 0.7% to 3,616.22, and the Hang Seng Index dropped 1.4% to 18,619.13. 

Property developers extended weekly losses after China Vanke decided to borrow US$1.1 billion from its two real estate subsidiaries a day after Fitch Ratings lowered the company's local and foreign debt rating to BB- from BB+. 

China Vanke plunged 8.8% to HK$6.26, China Resources Land decreased 4.5% to HK$30.30, and Henderson Development dropped 2.5% to HK$25.50. 

Tech stocks were also among the leading decliners, and Baidu, JD.com, Tencent Holdings, and Meituan declined between 1.5% and 3.5%. 

Alibaba Group Holding dropped 0.6% to HK$78.10 after the company announced its plans to raise US$4.5 billion through a convertible note offering and fund its stock repurchase plan.