Barclays cut their China GDP forecast for 2024 to 4.8 per cent from 5 per cent, Goldman Sachs reduced it to 4.9 per cent and JPMorgan lowered theirs to 4.7 per cent
Hong Kong
Hong Kong stocks fell on Tuesday as China’s economic gloom punctured investor sentiment, with major investment banks downgrading their economic projections for the world’s second-largest economy.
The Hang Seng Index slipped 1.6 per cent to 17,727.98 at closing of trade. The Hang Seng Tech Index declined 1.4 per cent, while the Shanghai Composite Index gained 0.6 per cent.
Logistics company Orient Overseas International fell 4.6 per cent to HK$109.10, travel giant Trip.com slid 3.8 per cent to HK$373.80 while sportswear brands Li Ning retreated 3.2 per cent to HK$14.92.
Tech stocks mostly declined, as Baidu fell 3 per cent to HK$91.15, Alibaba dropped 1.5 per cent to HK$75.50 and Tencent retreated 3.1 per cent to HK$378.
Economic data released on Monday showed growth momentum had weakened, leading to China GDP forecast downgrades by several major banks. 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.
“We are cautious about the second half”, as growth momentum weakens due to the sustained housing crisis with Beijing yet to execute a plan to complete the millions of unfinished pre-sold homes, analysts at Nomura including Ting Lu said in a note on Tuesday.
Ping An Insurance fell 5.4 per cent to HK$34.10 after it announced the sale of a US$3.5 billion convertible bond in an exchange filing this morning.
“The sell off [in Pingan] is related to investors reacted to investors’ concern about the potential share dilution and convertible arbitrage strategies,” said Louis Wong, executive director of Phillip Capital Management (Hong Kong).
Additionally, the improved odds of a second Donald Trump presidency in the US is viewed as a negative development for China, Wong added. The former US president, who chose Ohio senator JD Vance to be his running mate for the 2024 election, had branded China as the “biggest threat” to America, in an interview with Fox News.
US Federal Reserve Chair Jerome Powell’s comments overnight that the he had “greater confidence that inflation was moving sustainably down towards our 2 per cent target”, saw traders price in a greater chance of a rate cut at the September meeting.
This growing optimism triggered a rush of borrowers into the bond market. Hong Kong’s government hired banks for a possible three-currency tranche green bond offering under its HK$500 billion global medium-term note programme. China Cinda announced a two tranche sale of dollar bond, while SM Investments and Mitsubishi HC Finance also mandated banks for proposed bond sales.
Earnings worries are also hurting sentiment with Chinese-listed companies seen delivering weaker second-quarter financial results amid insufficient demand and weak consumer spending.
Other major Asian markets were mixed. Australia’s S&P/ASX 200 slipped 0.2 per cent while South Korea’s Kospi gained 0.2 per cent. Japan’s Nikkei 225 climbed 0.3 per cent.
