Hong Kong stocks eye policy support announcements as China's economic outlook dims

Hong Kong stocks were flat after trading in a narrow range on Wednesday, as investors awaited policy announcements from China's third plenum, amid broadly downbeat views on the outlook for the world's second-largest economy.

The Hang Seng Index edged up 0.1 per cent to 17,739.42 at the noon trading break. The Hang Seng Tech Index advanced 0.9 per cent, while the Shanghai Composite Index added 0.1 per cent.

JD.com added 2.4 per cent to HK$107 while its medical unit JD Health surged 4.1 per cent to HK$21.75. Baidu and Alibaba advanced 0.9 per cent to HK$91.70 and HK$76.20 respectively. Sportswear brand Li Nin jumped 5.4 per cent to HK$15.72 while dairy product maker Mengniu Dairy advanced 4.9 per cent to HK$15.10.

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Analysts reacted after China's National Bureau of Statistics released the sectoral breakdown of the second quarter GDP data on Tuesday.

"In light of new headwinds, including the slump in equity financing and the tightening of tax collection, we hold a cautious view of the second half and expect growth to slow from 5.0 per cent year-on-year in the first half to around 4.2 per cent in the second half," Ting Lu, chief China economist at Nomura wrote in a note on Wednesday.

"Beijing may be under pressure to announce more measures in coming months, especially after September, when concerns over the growth slowdown may become more elevated."

Earlier this week, Barclays cut their China GDP forecast to 4.8 per cent from 5 per cent, Goldman Sachs reduced theirs to 4.9 per cent from 5 per cent and JPMorgan downgraded it to 4.7 per cent from 5.2 per cent.

But the International Monetary Fund on Tuesday raised China's GDP growth forecast for 2024 to 5 per cent from 4.6 per cent, citing a rebound in private consumption and strong exports.

China's third plenum kicked off this week - the much-anticipated four-day closed door meeting of its Communist Party's Central Committee. Previous third plenum unveiled landmark policy changes that are expected to shape the nation's economic strategy in the coming years.

The lack of direction in Hong Kong and A-share market is partly due to weak economic data and slower than expected consumption, while traders are pricing in what may come out of the third plenary, said Kenny Wen, the head of investment strategy at KGI Asia.

"The market expects [the plenary] will focus on technological development and reaffirm the importance of 'new productive forces' to vigorously promote self-reliance," he said. "There will not be any disruptive policy, but a continuation or expansion of existing reform measures."

The outcome of the meeting will be unveiled in a statement on Thursday evening.

Meanwhile, traders are increasingly convinced that the US Federal Reserve will cut its benchmark interest rates at its September meeting.

Hong Kong's government green bonds will also be priced in on Wednesday. The bonds, which are expected to be rated AA+ by S&P Global and AA- by Fitch Ratings, are to be issued under the government's HK$500 billion (US$64 billion) global medium-term note programme.

Other major Asian markets were mixed. Australia's S&P/ASX 200 advanced 1 per cent while South Korea's Kospi fell 0.3 per cent. Japan's Nikkei 225 climbed 0.3 per cent.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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