Chinese Companies Line Up to Sell U.S. Dollar Bonds as Stock Indexes Search for Lower Levels

Li Chen
16 Jul, 2024
Hong Kong

Amid a growing cautious outlook for the second half, investors dialed back their economic growth outlook after a string of weak economic data releases on Monday. 

The Hang Seng index fell as much as 1.5%, and the CSI 300 index, tracking larger stocks on the mainland, edged slightly lower and extended losses for the second session in a row. 

Investors continued to lighten their holdings after China's second quarter economic growth, retail sales, and fixed-asset investment fell short of expectations. 

Policymakers in Beijing are struggling to develop a plan to rebuild consumer confidence and financial market-supportive measures amid falling consumer demand and a multi-year decline in broader market indexes. 

The Chinese government has limited financial flexibility as the country's debt hovers near 300% of GDP, and banks are struggling to account for losses linked to the residential property market. 

The Chinese Communist Party's third plenum is expected to release its broad outline of macroeconomic plans to bolster economic growth at the end of a four-day meeting on Thursday. 

However, investors have lowered their expectations of deep economic reform, including local and regional governments' huge losses that are not reflected in their annual finances. 

Meanwhile, private businesses continue to keep foreign earnings overseas amid widespread belief that the People's Bank of China is not in a position to sustain the current level of the yuan as economic growth continues to slow to 2% annual long-term growth. 

 

China Stock Movers 

The Hang Seng index decreased 1.4% to 17,770.46, and the CSI 300 index added 0.1% to 3,480.74. 

Tech stocks were among the leading decliners in Tuesday's trading. 

Alibaba Group declined 1.4% to HK $75.50, Baidu fell 3.6% to HK $90.60, Tencent Holdings decreased 2.2% to HK $381.80, and Meituan eased 1% to HK $118.0. 

Ping An Insurance Group declined 5.2% to HK $34.20, and the insurance giant announced its plan to sell $3.5 billion of convertible bonds. 

Several Chinese companies prepared to float U.S. dollar bonds amid growing expectations that U.S. interest rates are likely to ease in the coming months after the latest comments from Federal Reserve Chair Jerome Powell supported the possibility of a rate cut as early as September. 

China Cinda, SM Investments, and Mitsubishi HC Finance are looking to sell bonds denominated in the U.S. dollar as early as in the third quarter.