China Stocks Hit Wall of Earnings Growth Realities

Li Chen
09 Oct, 2024
Hong Kong

Stock market indexes in mainland China and Hong Kong traded down as investors reassessed the scale of the three-week rally. 

The Hang Seng index bounced around between gains and losses, and the CSI 300 index dropped as much as 4% after investors headed for exit. 

Chinese investors fell into a familiar pattern of raised hopes by authorities, only to be followed by severe despair for the third time this year. 

Investors shifted their attention to an upcoming release of September economic data on October 18 and held out for more clear and specific measures that could revive consumption. 

China's economy has struggled to meet the government's annual growth target rate of 5%, but the world's second-largest economy is still the fastest-growing in the top five economies of the world. 

About three weeks ago, the People's Bank of China announced a raft of monetary policy measures that jolted the market sentiment. 

The market rally reached a feverish pitch after Politburo, in an unexpected meeting at the end of September, issued a strongly worded note to local governments to "do whatever it takes" to meet growth targets. 

There is a growing realization among investors, after two weeks of reflection, that the recent market run-up may have gone too far.

And little has changed in the real economy in the near future, which could provide a boost to corporate earnings over the next two quarters. 

The central authorities' previous two attempts to jawbone the market rally have produced few results for investors and failed to revive consumer confidence, the critical ingredient needed for the sustained market rally. 

 

China Stock Movers 

The Hang Seng index increased 0.8% to 21,096.32, and the mainland-focused CSI 300 index dropped 3.3% to 4,125.26. 

Bank of China declined 3% in Shanghai trading but edged up 0.3% in Hong Kong. China Construction Bank was nearly unchanged in Hong Kong but declined 1.5% in Shanghai. 

Property developers soared as much as 120% in the ten-session rally before turning lower in Tuesday's trading. 

China Vanke declined 4% to HK $7.20, China Resources Land fell 1% to HK $25.70, and Longfor Group dropped 1% to HK $12.82. 

Alibaba Group increased 0.3% to HK $104.70, Tencent Holdings added 0.7% to HK $440.0, and JD.com edged up 1.7% to HK $165.70.