China and Hong Kong Indexes Extend Losses Amid Fading Stimulus Rally

Li Chen
08 Jan, 2025
Hong Kong

Stock market indexes in China and Hong Kong declined amid geopolitical tensions and a weak corporate earnings outlook. 

The Hang Seng index dropped 1%, and the mainland-focused CSI 300 index decreased 0.7%, as investors reacted to the sharp decline in Wall Street indexes in overnight trading.

The Hang Seng index extended losses for the third week in a row and wiped out most of the gains in the final quarter of 2024 after policymakers announced a raft of stimulus measures. 

However, market enthusiasm has waned in the last five weeks of trading as policymakers failed to follow through with specific stimulus implementation steps. 

The Hang Seng has dropped more than 15% from the peak of 23,077 reached on October 7, and traders are bracing for the index to test 17,249, the level before the stimulus announcements. 

Moreover, market sentiment was dented after the U.S. service sector continued to grow for the tenth month in a row in December, but inflation expectations also rose amid potential tariffs on imported goods. 

The latest service sector strength and inflation expectations confirmed that the Federal Reserve may not need to lower rates in the imminent future, keeping interest rates higher for longer. 

On the domestic economic front, investors looked ahead to the release of producer price and consumer price inflation data later in the week, and both measures of inflation are expected to show the continuation of the deflation trend. 

 

China Stock Movers 

The Hang Seng index declined 1% to 19,239.70, and the mainland-focused CSI 300 index fell 0.7% to 3,768.35. 

Technology stocks declined for the second consecutive session after the U.S. expanded its list of Chinese companies deemed as military entities.

Tencent Holdings Ltd. decreased 2.3% to HK $370.80, Baidu Inc. declined 1% to HK $79.60, and Alibaba Group Holding Ltd. fell 0.3% to HK $81.10.

BrainAurora Medical Technology was nearly unchanged at HK $3.25 after the company completed its HK $500 million public offering. 

Hong Kong's first public offering in 2025 sold 181 million shares priced at HK $3.22 per share.