China & HK Equities Lower As PMI Misses, Home Sales Drop

Hong Kong & Chinese equities are lower today following Caixin China PMI Mfg unexpectedly contracting in July. While the Fed's dovish tone overnight and talk of potential cuts in September, investors remained cautious and still expect Hong Kong lenders wont start cutting rates until mid-2025. Chinese property stocks fell after new home sales dropped 19.7% in July, indicating that recent policy measures might be insufficient for a sustainable recovery

• Major large-cap indices are just off earlier lows with the HSI down 0.25% while the CSI 300 is off 0.45%. Property stocks are the worst performing with the Mainland Property Index is 2.90% lower & CSI 300 RE Index is off 2.40%. Tech stocks have missed the global rally overnight with the HSTech Index off 1.30%
• China’s manufacturing activity contracted in July for the first time in nine months, with the Caixin PMI dropping to 49.8 from 51.8, indicating weakening export momentum. This unexpected decline highlights concerns about the country's economic outlook, exacerbated by subdued consumer demand and external uncertainties such as potential tariffs.
• China has seen a significant increase in A-share stock buybacks, with 1,804 companies repurchasing 115b yuan worth of shares in the first seven months of 2024, surpassing last year's totals. This surge, mainly in the electronics, electrical equipment, computers, pharmaceuticals, and non-ferrous metals industries, aims to boost investor confidence. The Shanghai SE A Shares Index is little changed this year, while the Shenzhen A Share Index is off about 12% for the year.
• The US is considering new restrictions on China's access to advanced AI memory chips and related equipment, targetting major semiconductor firms that use US products. These measures, part of a broader package including sanctions on over 120 Chinese firms, aim to limit China's ability to produce high-bandwidth memory chips and advanced dynamic random access memory. The Biden administration is also pressuring allies such as South Korea, Japan, and the Netherlands to adopt similar controls, according to BBG.
• Later today we have Hong Kong Retail Sales data