China & HK Stocks Struggle As Market Looks For Further Policy Support

Hong Kong and China equity markets are mostly lower today. The subdued performance in these markets contrasts with the broader positive trend in Asian equities, which were bolstered by a tech-led surge in Wall Street. The market still seems a bit concerned around the US election after Biden dropped out with odds showing Trump is well in front, leading to concerns of tougher trade restrictions and tariffs if he does win the Presidential Election. Additionally, the markets are still hoping for more policy announcements to support the struggling Chinese economy following last week's Third Plenum.

• Hong Kong equities are mostly lower today with the Property Indices have given back earlier gains with (Mainland -0.25%, HS Property -0.40%), tech stocks are drifted lower through the day with the HSTech Index now down 1% while the broader HSI is 0.20% lower.
• China onshore markets are underperforming HK stocks, growth/mid cap stocks looks to be the worst performing today with the CSI 500 down 1.70% & ChiNext down 1.55% while small-caps indices are down slightly less with the CSI 1000 1.40% lower & CSI 2000 0.70%, the large-cap CSI 300 is down 0.95%.
• China's government spending fell almost 3% in the first half of the year, with local government expenditures down 4.2%, contributing to a larger deficit of 3.63 trillion yuan and potentially hindering economic growth. Despite central government spending rising 10%, overall economic growth slowed to 5%, prompting fiscal support measures and interest rate cuts to boost the economy, as per BBG.
• The recent Third Plenum and announcements that came from it together with the PBoC cutting LPRs on Monday have done little to spur the market higher, while it is suspected the the China National Team has been involved in supporting the market over the past month, the CSI 300 is up just 0.64% over the same period which suggests there may be further weakness to come without further supportive policies measures.