Chinese Stocks Tumble In Hong Kong As Fiscal Planning Fails To Materialize

 Chinese Stocks Tumble In Hong Kong As Fiscal Planning Fails To Materialize

Chinese stocks tumbled in Hong Kong as a high-profile legislative meeting disappointed some investors who had been hoping for massive stimulus to revive domestic demand and tackle deflation.

Chinese Stocks Tumble In Hong Kong As Fiscal Planning Fails To Materialize

 

The HangSeng China Enterprises Index was down 1.6% as of 1:19 p.m. local time, with property and consumer-related stocks leading the biggest losses. The CSI 300 index was volatile, reversing an earlier drop of 1.4% to trade little changed. A gauge of Chinese developer stocks tracked by Bloomberg Intelligence was briefly down more than 6%.

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The mixed reactions came as investors digested Beijing's latest fiscal package, which focused on reducing local government debt burdens and lacked new stimulus for consumption. The results were somewhat disappointing given the heightened policy expectations ahead of the meeting, especially as Donald Trump's presidential win has created fresh uncertainty for China's economy.

 

Chinese data released over the weekend highlighted the need for more efforts to boost growth, with consumer price growth remaining near zero and factory-gate price increases continuing to fall. UBS lowered its 2025 growth forecast for China following Trump's election, expecting an expansion of "around 4%" for 2025 and "significantly slower" momentum through 2026.

 

Foreign companies are also pulling money out of China as the growth outlook remains bleak. Foreign direct investment fell by about $13 billion during the first nine months of the year, indicating some investors remain pessimistic even as Beijing rolls out stimulus measures aimed at stabilizing growth.

 

Some market observers say China is likely to retain policy space to prepare for a more unfavorable trade environment after Trump comes to power in 2025 after the incoming US president threatened to impose 60% tariffs on Chinese goods. Finance Minister Lan Fan promised a "more assertive" fiscal policy next year during a briefing on Friday after a meeting of the Standing Committee of the National People's Congress.

 

In addition, the country's cabinet, the State Council, on Friday vowed to increase financial support for industries to boost stable foreign trade growth. Policy expectations could rise again ahead of China's annual Central Economic Work Conference in December, where top leaders lay out economic policy priorities for the coming year and set targets for gross domestic product growth, fiscal deficit and inflation.