A GAUGE of Chinese stocks listed in Hong Kong approached a technical correction as investors remain cautious about the economic outlook ahead of a key meeting of the nation’s top leaders.
The Hang Seng China Enterprises Index fell as much as 1.6 per cent on Monday (Jul 8), taking its decline from a May 20 high to more than 9 per cent. On the mainland, the CSI 300 Index declined for a fifth straight day. That’s after the benchmark capped a seventh week of losses on Friday, its longest losing run since early 2012.
A rally in Chinese equities that started earlier this year has lost momentum amid a patchy economic recovery and intensifying concern over potential geopolitical risks stemming from the upcoming US election. Investors also don’t expect any big stimulus announcement from the Third Plenum, the Jul 15 to 18 meeting that will gather some 400 government bigwigs, military chiefs, provincial bosses and academics in Beijing to steer the country’s political and economic course.
“Investors are staying on top of macro and policy developments in China but feel no rush to return to the market despite record-low exposure in recent years,” Morgan Stanley strategists including Laura Wang wrote in a note following their recent US marketing trip. “Currency weakness, geopolitical uncertainty, and China’s macro challenges remain near-term hurdles.”
MSCI’s key gauge of Chinese stocks fell into a technical correction at the end of June, while a Bloomberg Intelligence measure of developer shares has lost about 30 per cent from its May high. The Hang Seng Tech Index too has entered a correction. BLOOMBERG
