China & HK Equities Lower As Weak Loan Demand Continues

Chinese & Hong Kong stocks declined after data showed a contraction in bank loans to the real economy, the first in 19 years. The weak demand underscores ongoing sentiment issues following the real estate market decline, and while bond issuance trends are encouraging, further policy rate cuts may be necessary to stimulate demand.

• Hong Kong equities initially opened the session higher, before paring gains. The HSI is down 0.10%, while both property and tech indices are 0.40% lower. China mainland equities are trading slightly worse than their HK peers, with CSI 300 down 0.40% while the growth focused ChiNext Index is off 1%.
• China's stock market turnover dropped to its lowest level in over four years, with combined transactions on the Shanghai and Shenzhen exchanges hitting just 496b yuan. This decline reflects growing pessimism as investors shift focus to government bonds amid a weakening economy and an ongoing housing crisis.
• In the property space, Moody's downgraded China Vanke's debt rating to B1 from Ba3 and further into junk territory due to weakening sales and ongoing margin pressure amid China's property market slump. Despite efforts to secure financing and deleverage, concerns remain about Vanke's financial health, with its dollar bonds trading at significant discounts, reflecting fears of long-term risk.
• Tomorrow, we have China Industrial Production & Retail Sales followed by Hong Kong's GDP on Friday