China Indexes Extend Losses, Yuan Weakens to a 6-month Low

Li Chen
29 May, 2024
Hong Kong

Market indexes headed lower and extended recent losses as investors assessed the impact of policymakers' plans to revive property market transactions and stabilize economic growth. 

Shenzhen and Guangzhou joined other top-tier cities to ease restrictions on home purchases, following efforts by the politburo and the People's Bank of China to encourage more activities in the sector. 

Investors are increasingly worried that policymakers' focus on encouraging real estate purchases may fall flat amid a lack of consumer confidence, a lack of credibility among real estate developers, and elevated home prices. 

Despite the added incentives to buy real estate, most families are parking their money in bank savings or purchasing precious metals, avoiding the purchase of new and unfinished houses. 

Investors are also looking ahead to the release of purchasing managers' index data on Friday, and expectations are high that the manufacturing sector will remain in expansion. 

China's top leadership has emphasized advanced manufacturing as one of the key drivers of economic growth, and exports of electric vehicles, renewable energy, and advanced electronics are expected to contribute to job market expansion. 

The Chinese yuan drifted to a six-month low of 7.2658 against the U.S. dollar ahead of the release of the manufacturing sector update on Friday. 

The People's Bank of China also set the exchange rate near the bottom of its trading range to facilitate exports and stem the growing tide of capital outflow. 

Currency traders are bracing for more devaluation of the yuan amid persistent weakness in the Japanese yen, pressuring already narrow margins for exported goods. 

 

China Stock Movers 

The CSI 300 index increased 0.1% to 3,614.27, and the Hang Seng index dropped 1.8% to 18,491.92. 

Property developers traded with a downward bias on the worry that the recent measures announced by the government are likely to fall short in reviving the fortunes of companies. 

China Resources Land decreased 1.6% to HK$30.0, China Vanke declined 3% to $5.70, and Longfor Group fell 1% to HK$13.24. 

Property developer stocks have rebounded about 30% in the last three weeks of trading, but stocks in the sector are still down more than 70% from the peak in April 2021. 

Lenovo Group declined 1.9% to HK$11.60 after the personal computer maker signed a deal with Saudi Arabia's sovereign wealth fund to sell $2 billion of convertible bonds. 

Stock declined on the worry that a higher share count would dilute earnings per share. 

BYD soared 5.3% to HK$217.60 after the electric vehicle maker announced an upgrade that could extend the driving range of its hybrid electric vehicle.