Hong Kong stocks approached a two-week low before this week’s release of reports that could provide additional evidence of China’s economic decline.
Hong Kong stocks drop as banks and BYD tumble ahead of China data. Banks declined the rumor that they will be required to extend additional loans to troubled real estate developers, while BYD declined due to a price war among Chinese EV manufacturers.
On Monday trading, the Hang Seng Index declined 0.2% to 17,525.06, its lowest level since November 17. The Technology Index recovered a maximum decline of 1.3% with a 0.2% gain, whereas the Shanghai Composite Index fell 0.3%.
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ICBC, the leading lender in China, experienced a 0.3 percent decline in value to HK$3.78. Bank of China (Hong Kong) also sank 0.9 percent to HK$21.35, whereas China Merchants Bank declined 1.7 percent to HK$29. Alibaba Group fell 0.1% to HK$76.10, and Meituan declined 0.5% to HK$108.60 on the rumor that China will disclose additional measures to stimulate the tech sector during President Xi Jinping’s Tuesday visit to Shanghai. As a result, tech stocks trimmed losses.
New World Development fell 5.5% to its lowest level since 2003, HK$12.46, while BYD fell 3.7% to HK$220, the lowest level in three months. As part of a promotional campaign, the EV manufacturer reduced the price of select older models by as much as 10,000.
The Hang Seng Index is anticipating its first monthly advance since July, with China’s efforts to restore economic growth assisting. Following a cumulative decline of 15% over the previous three months, the benchmark has increased by 2.4% this month. According to Goldman Sachs, Beijing must do more to revitalize activity.
Lenders came under pressure amid concerns that the quality of their loan portfolios would deteriorate in the wake of reports that Beijing would request them to write more unsecured loans to alleviate the liquidity constraints that home builders are experiencing and to halt a multi-year industry downturn.
For now, developers may need help to furnish corresponding assets as collateral. However, “offering unsecured loans also imposes significant risks for the banks involved,” as stated in a report by Wang Yifeng, chief banking analyst at Everbright Securities.
In the interim, according to a government report released today, industrial profits increased by 2.7% year-over-year in October, compared to an 11.9% increase in September. Consensus economist projections suggested that manufacturing likely experienced a contraction in November before releasing an official report on November 30.
“We anticipate manufacturing to remain sluggish this month,” Goldman Sachs stated in a report. As new home sales decelerate again in November, “additional easing measures are required to mitigate left-tail risks,” the report continued.
On Monday, major Asian markets generally traded lower. The S&P/ASX 200 in Australia and the Nikkei 225 in Japan fell 0.8%, whereas the Kospi in South Korea remained relatively unchanged.
