Hong Kong stocks slide as China’s third plenum underwhelms, geopolitical angst weighs | South China Morning Post
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A portrait of former Chinese leader Mao Zedong at Tiananmen Square in Beijing, China, on Saturday, July 6, 2024. Of the countless meetings that China’s Communist Party holds regularly, the Third Plenum scheduled on July 15 stands out for its potential impact on the world’s second-largest economy. Photographer: Na Bian/Bloomberg
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Hong Kong stocks slide as China’s third plenum underwhelms, geopolitical angst weighs

  • Goldman Sachs analysts said more demand-side easing measures – especially on the fiscal and housing fronts – are needed to hit the ‘around 5%’ growth target
Banking & finance
Mia Castagnone
Mia Castagnonein Shanghai
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Hong Kong stocks tumbled on Friday after China’s third plenum announcement underwhelmed, with investors now awaiting further details about fiscal reforms and steps to boost growth in the world’s second-largest economy.

The Hang Seng Index fell 2 per cent to 17,417.68 at close of trade, bringing the week’s losses to 4.8 per cent. The Hang Seng Tech Index dropped 2.1 per cent but the Shanghai Composite Index added 0.5 per cent.

Property developer Longfor plunged 6 per cent to HK$10.68, while New World Development lost 2.5 per cent to HK7.69 and Sun Hung Kai Properties fell 2.8 per cent to HK$70.15. Alibaba dropped 2.6 per cent to HK$73.80, while peers Baidu fell 1.5 per cent to HK$88.15 and Tencent fell 1.4 per cent to HK$364.

China’s four-day session ended yesterday, also known as the third plenum, and failed to make any major announcement aimed at promoting economic growth.

“We believe more demand-side easing measures – especially on the fiscal and housing fronts – are necessary to secure the full-year ‘around 5%’ real GDP growth target, and view the July Politburo meeting as a window for more easing rhetoric and measures,” said Goldman Sachs in a report.

Some felt that the announcement suggested diminished importance of markets because earlier plenums had declared a ‘decisive role’ for the market and that wording had been removed in this year’s communique.
The committee vowed that China would continue to deepen reforms in all areas, including the economy, rural land, taxation, environmental protection, national security, fighting corruption, and cultural development.

The Party also stressed the need to maintain market order and correct market failures, reflecting Beijing’s concerns about risks in its financial system.

Investment banks and fund managers were broadly positive about the economic policy direction after the communique outlined China’s broad reform packages over the medium and longer term.

The communique was – as some economists expected – short and vague, with the full statement of the meeting to be released next week, said Lynn Song, Greater China chief economist at ING.

Many traders will look to the Politburo meeting at the end of the month for specific policy announcements, he added.

“In the end, whether or not China can successfully transition its economy to the next stage of development will depend on how effective policymakers are in achieving these long-term goals,” said Song.

Meanwhile investors are also mindful of geopolitical tensions between the world’s two biggest economies. Bloomberg reported, citing data from the US Department of the Treasury, Chinese investors dumped a net US$42.6 billion worth of long-term securities consisting of Treasury, agency and corporate bonds as well as equities in May. Sales in the first five months of this year totalled US$79.7 billion, an all-time high for the January-May period, it reported.

Other major Asian markets mostly fell tailing Wall Street’s tech-led sell-off. Australia’s S&P/ASX 200 fell 0.8 per cent while South Korea’s Kospi dropped 1 per cent. Japan’s Nikkei 225 fell 0.2 per cent.

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