Hong Kong’s equity markets experienced a significant decline on Monday following Beijing’s announcement of a fiscal stimulus package that failed to meet investor expectations. The Hang Seng index, widely regarded as a key indicator of foreign investor sentiment towards China, dropped 1.5 per cent at close.
The much-anticipated fiscal stimulus package, valued at 1.4 trillion dollars, primarily focuses on restructuring local government debt but notably lacks measures to boost consumer spending. This absence of consumer-focused initiatives has left market participants underwhelmed, leading to a selloff in Hong Kong-listed shares.
Jason Lui, head of Asia-Pacific equities and derivatives strategy at BNP Paribas, observed that investors were unwinding their bullish positions following the announcement. “Investors are unwinding bullish bets as they feel the major event is over and they are a bit let down,” he noted.
The Chinese currency also faced pressure, with the People’s Bank of China setting the renminbi’s daily fixing at its lowest level in a year, at 7.18 against the dollar. This 0.5 per cent reduction from Friday’s fix reflects growing concerns about capital outflows and potential trade tensions.
Commodity markets reflected the dampened sentiment, with iron ore futures on the Dalian Commodity Exchange falling 3 per cent to 760 yuan per tonne. Copper prices also declined, dropping 2.4 per cent to 9,477 dollars per tonne on the London Metal Exchange.
Market analysts at Nomura highlighted that the stimulus package’s emphasis on stabilisation rather than growth, combined with the absence of bank recapitalisation measures, has disappointed equity investors. The focus now shifts to December’s Central Economic Work Conference in Beijing, where market participants hope for more comprehensive stimulus details.
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