China's Weak Credit Demand Highlights Changing and Slowing Economic Activities, Market Indexes Halt 5-Day Rally

Li Chen
14 Aug, 2024
Hong Kong

Stocks in China faced headwinds as weak demand for new loans raised additional worries about the economic growth outlook. 

The Hang Seng index decreased 0.4% and the CSI 300 index fell 0.5% as investors awaited the release of retail sales and industrial output data on Thursday. 

The Hang Seng halted its five-day rally amid worries about the macroeconomic backdrop and weak outlook for corporate earnings. 

China's new loans plunged 88% to 260 billion yuan, or $36.3 billion, in July, driven by weak credit demand, the People's Bank of China reported late Tuesday. 

New loans in June were 2.13 trillion yuan and 345.9 billion yuan a year earlier.

The weakness in corporate loans and residential mortgage loans dragged the overall demand for new credit, driven by seasonal factors that also played a role, as July is generally a weak month for new loans. 

China's new loan demand is on the slide as new residential property construction plunges and demand from local government financing vehicles sharply falls. 

Investors are bracing for more weak economic data on Thursday, and retail sales are likely to rise less than 3% and manufacturing production is expected to show broad weakness despite the strong export shipments. 

 

China Stock Movers 

The Hang Seng index declined 0.4% to 17,110.23 and the CSI 300 index dropped 0.5% to 3,316.61. 

Tencent Holdings declined 2.7% to HK $370.40, Alibaba Holding decreased 0.3% to HK $78.40, and Baidu fell 0.2% to HK $82.45. 

Zhejiang Weihua New Material soared 40% to 23.81 yuan on its first day of trading in Shanghai, and the maker of fluorinated fine chemicals raised 1.5 billion yuan in an initial public offering.