China Stocks Lack Near-term Catalysts to Support Recent Market Surge

Li Chen
24 Oct, 2024
Hong Kong

Stock market indexes in China and Hong Kong eased as investors booked profit for the second day in a row. 

The Hang Seng and CSI 300 indexes fell 1% as investors debated the size of the fiscal stimulus and its effectiveness on corporate earnings. 

The mainland-focused CSI 300 index has jumped 35% over the three-week period to October 8; however, the market index has eased over the last two weeks.

The package of monetary stimulus measures is not strong enough to lift earnings in the near future, which could force investors to wait six months before the first evidence of earnings is available. 

Moreover, additional large fiscal measures are not likely to be released after the U.S. presidential election on November 5, because a change in leadership could have a significant impact on the relationship between the U.S. and China. 

In addition, earnings growth in the third and fourth quarters is likely to be weak and not provide much-needed support for the indexes to advance further from the current level. 

Investors are likely to see the impact of monetary policy measures announced by the People's Bank of China only in the first quarter of 2025, testing the patience of investors in the near future. 

Market sentiment in Hong Kong was further dented after investors lowered their expectations of aggressive rate cuts in the U.S. over the remaining two policy meetings in 2024.

The S&P 500 index and the Nasdaq Composite dropped as much as 1.5% in overnight trading in New York as yield on 10-year Treasury notes advanced to a 3-month high of 4.27%, following a string of robust economic data flows and worry about the growing budget deficit. 

 

China Stock Movers 

The Hang Seng Index declined 1.1% to 20,507.18 and the CSI 300 index dropped 1% to 3,931.11. 

Sands China increased 2.7% to HK $19.16 after the casino operator in Macau reported a 16% rise in earnings in the third quarter. 

Horizon Robotics soared to HK $4.38 after the autonomous driving technology firm priced its initial public offering at HK $3.99 per share and raised US$696 million. 

The company sold 1.355 billion shares, and its Hong Kong tranche of 203.7 million shares was oversubscribed by 33.8 times and its international tranche of 1.15 billion by 13.8 times. 

Baillie Gifford Overseas Limited, an associate of Scottish Mortgage Investment Trust plc, will retain a stake of 3.89% in the company after the global offering. 

Alibaba Group declined 3.7% to HK $93.70, Tencent Holdings dropped 1.7% to HK $420.80, and JD.com Inc. fell 2.8% to HK $154.60.