HONG KONG: China and Hong Kong stocks retreated on Wednesday after the previous session’s rally, as investors were sceptical about the strength of the prospective stimulus signalled by Beijing to support the economy and boost demand.
China’s blue-chip CSI 300 Index dipped 0.21% and the Shanghai Composite Index declined 0.26%.
The Hang Seng Index closed down 0.36% and Hang Seng China Enterprises Index fell 0.83%.
Broader Asian markets were trading mostly weaker ahead of the US Federal Reserve’s expected interest rate hike, due to be delivered later in the day.
China’s securities regulator on Tuesday vowed to deepen reforms in its capital markets and open them up further in the second half of this year, as part of moves to implement policy support pledged by top leaders of the country.
However, many market participants doubt if the Chinese government will roll out any big stimulative measures that can get investors excited.
Arthur Budaghyan, chief emerging markets/China strategist at BCA Research, said in a note authorities are likely to provide targeted and piecemeal stimulus, thus the stimulus multiplier will be low and hardly drive the economy.
Yet Goldman Sachs analysts said policymakers’ assessment of the economy and the perceived policy bias are more dovish than most market participants’ prior expectations.
“The policy put has been activated, and the window for a tactical bounce for Chinese stocks is now open,” Goldman Sachs said in a note on Wednesday.
Hong Kong-listed China property stocks lost steam, dropping 1.8%, as worries mount over Country Garden’s ability to repay huge debts.
Tech giants listed in Hong Kong lost 0.9%.
In mainland A-shares, media stocks fell 2.8% to lead the declines.
On the geopolitical front, US Secretary of State Antony Blinken criticized China’s ‘problematic behaviour’ during a visit to Tonga.
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