Hong Kong stocks retreat after 'two sessions' meeting in Beijing sparks concerns about China's economic growth

Hong Kong stocks slipped as investors worried about growth challenges in the world's second largest economy after China's annual parliamentary meeting unveiled only modest fiscal policy support measures.

The Hang Seng Index declined 2.6 per cent on Tuesday to close at 16,162.64. It was the biggest retreat since January 17. The Tech Index tumbled 4.3 per cent, while the Shanghai Composite Index added 0.3 per cent. A gauge tracking Chinese stocks listed in New York tumbled 4 per cent overnight.

All but five of the 82 index members saw price declines. Tencent slipped 2.9 per cent to HK$268.20, Alibaba lost 3.3 per cent to HK$69.70 while rival JD.com slid 7.5 per cent to HK$82.75 before its earnings card. Online travel agency Trip.com slid 4.5 per cent to HK$332.60 and food delivery platform Meituan lost 5.6 per cent to HK$86.35.

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China's top legislature, the National People's Congress (NPC), opened its annual meeting on Tuesday. Premier Li Qiang set a GDP target of around 5 per cent and a consumer price increase target of around 3 per cent.

"We think the 'around 5%' GDP growth target will prove very challenging," according to a note from Nomura analysts which also said "much more stimulus is needed to reach the ambitious growth target".

It added that the higher base, the still faltering property sector, the crackdown on local government debt, the likely significant slowdown of investment in the new energy sector, and the lacklustre data for January and February, were some of the challenges facing the world's second largest economy.

The government also set its ratio of deficit to GDP at 3 per cent for 2024, and will also issue 1 trillion yuan ultra-long-term special treasury bonds to stimulate the economy.

"We were hoping to see a more stimulative stance in fiscal policy," said Aninda Mitra, Head of Asia Macro & Investment Strategy at BNY Mellon Investment Management. "But the central government deficit of only 3 per cent of GDP is disappointing."

The Hang Seng Index had surged 6.6 per cent last month after Beijing rolled out a slew of market rescue measures to check the slide in stock prices. Some investors might have sold their positions to lock in gains after the stimulus measures, especially the deficit target, turned out to be less forceful than expected, according to Jason Chan, investment strategist at Bank of East Asia.

Other key Asian markets also traded lower. South Korea's Kospi Index lost 1 per cent and Australia's S&P/ASX 200 dropped 0.2 per cent. Japan's Nikkie 225 was little changed.

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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