China, HK stock rally fades as Beijing’s incremental support disappoints

BEIJING: Aug 2 (Reuters) - China and Hong Kong stocks pulled back on Wednesday after a recent rally that was spurred by stimulus hopes as some investors booked profits in the absence of concrete and forceful measures by Beijing to shore up a flagging economy.

China’s bluechip CSI300 Index fell 0.7%, while the Shanghai Composite Index lost 0.9%. Hong Kong’s Hang Seng Index declined 2.5% in its worst day in nearly four weeks.

China and Hong Kong stocks had rebounded sharply since the July 24 Politburo meeting, where top Chinese leaders pledged to step up policy support for the economy amid a tortuous post-COVID recovery.

But the rally appears to be losing steam as measures announced so far to boost consumption, revive capital markets, and aid the struggling property sector are seen as being either vague or too mild.

“Recent economic data shows that the incremental easing approach had not been effective on sustaining GDP growth momentum,” Chi Lo, Greater China economist at BNP Paribas Investment Partners, wrote in a note.

“China’s growth and market outlook are indeed contingent upon Beijing acting quickly and decisively to shore up activities and confidence before the current pessimism becomes entrenched and hurt growth further.”

He warned that if easing policies remains incremental, investors would be disappointed, and “the market could even go into another round of sell-off”.