Weak Economic and Earnings Outlook Kept Gains In Check In Hong Kong, Shanghai Indexes Traded Down

Li Chen
26 Aug, 2024
Hong Kong

 Stocks in Hong Kong advanced but fell in Shanghai amid lingering worries about economic growth and corporate earnings. 

The Hang Seng index advanced 0.8% in the hopes that the Hong Kong Monetary Authority would lower rates in about three weeks following a possible rate cut in the U.S. 

Federal Reserve Chair Jerome Powell sent his clearest signal so far: that the central bank is ready to adjust its monetary policy and may lower rates if there is ongoing economic data.

Powell did not say the amount and timing of the rate cut, but traders are anticipating at least a 25 basis point rate cut after the policy meeting on September 19, followed by additional rate cuts of at least another 50 basis points over the next two policy meetings in 2024. 

The Hong Kong Monetary Authority would follow similar rate cuts to keep the Hong Kong dollar parity with the U.S. dollar. 

The prospect of an imminent rate cut in Hong Kong lifted the benchmark Hang Seng index, but market sentiment remained weak in mainland China markets. 

Investors have been shunning stocks amid a weak economic outlook and a lack of earnings visibility, and investors are pouring new assets into exchange-traded funds, or ETFs, that track investments in Japan and the U.S. and snapping up luxury properties in Shanghai and Beijing. 

Stock turnover in China's stock markets dropped to a four-year low, according to the data released by the China Securities Regulatory Agency, amid the waning effect of market-supportive measures released by policymakers in May. 

The 10-year China government bond yield hovered near a record low of 2.14%, as investors prefer steady income from bonds over persistent losses from stocks. 

Meanwhile, the PBoC held its one-year medium-term loan facility rate at 2.13% on Monday, after lowering rates in the previous month. 

 

China Stock Movers 

The Hang Seng index advanced 0.8% to 17,756.09, and the CSI 300 index fell 0.1% to 3,324.89. 

Tech stocks advanced in Monday's trading in Hong Kong, tracking gains in Friday's trading in New York. 

Baidu increased 1.9% to HK $83.75, Meituan added 0.6% to HK $108.20, and Tencent Holdings gained 1% to HK $379.40. 

Alibaba Group Holding decreased 0.6% to HK $82.15, and the e-commerce marketplace is set to change its Hong Kong listing to a dual-primary listing on August 28. 

Property stocks in Hong Kong advanced following the prospect of rate cuts in the U.S. starting as early as mid-September. 

Longfor Group Holdings gained 2.6% to HK $8.71; China Resource Land added 0.9% to HK $21.85; Sun Hung Kai Properties gained 3.5% to HK $74.40; and Henderson Land Development advanced 3.8% to HK $23.0.