Hong Kong Stocks Drop on Weak China Loan Data; Mainland Shares Stabilise
Hong Kong stocks fell to a three-week low on Tuesday as unexpectedly weak loan demand in China weighed on investor sentiment. In contrast, mainland stocks held steady, buoyed in part by reports that China may reduce taxes on home purchases to support its housing market.
Hong Kong’s Hang Seng Declines, Mainland Markets Mixed
Hong Kong’s Hang Seng Index dropped 1.7% by midday, marking its third consecutive day of losses. The Hang Seng has lost around 13% since reaching a peak in early October, as investors took profits following a stimulus-induced rally in September. Meanwhile, on the mainland, China’s blue-chip CSI300 Index edged up by 0.4%, and the Shanghai Composite Index reversed early gains to trade down 0.1%.
Weak Loan Demand Highlights Fragile Economic Conditions
Data released on Monday showed Chinese banks issued 500 billion yuan ($69.5 billion) in new loans in October, a sharp decrease from September and below analyst expectations. This weak loan growth signals persistently fragile domestic demand, affecting both households and businesses. Analysts from Bank of America commented that while recent policy shifts have been encouraging, further measures may be necessary to stabilise growth.
In addition to weak loan data, other recent economic indicators showed consumer prices growing at their slowest rate in four months and deepening deflation in producer prices, adding to concerns over China’s economic recovery.
Housing Sector News Boosts Sentiment, But Uncertainty Remains
Investor sentiment received a slight boost after a Bloomberg report suggested China is preparing to lower home-buying taxes, which would support the struggling property market. Following the report, China’s real estate index rose 0.5%, partially offsetting the broader market concerns.
However, broader sentiment in China remains subdued after a stimulus package announced on Friday fell short of market expectations.
Tech Stocks Lead Losses in Hong Kong
In Hong Kong, technology stocks led the downturn, with major players Alibaba and Meituan declining by 2.5% and 5.2%, respectively. The Hong Kong Tech Index also dropped sharply, adding to overall losses in the region.
Yuan Under Pressure as Market Awaits Policy Moves
China’s yuan weakened to a three-and-a-half-month low on Tuesday. Concerns about potential US tariffs on Chinese goods under the incoming US administration have added pressure to the currency. Markets are monitoring developments as President-elect Donald Trump prepares to take office, with fears that new tariffs could further challenge China’s economy.
