Deeper Evergrande Worry Weighs

The CSI finished 0.7% lower on Monday.

• Continued/deeper property sector worry weighed, as Evergrande scrapped meetings with creditors that were scheduled for the early part of this week. Wires have flagged increased liquidation risk for the firm, which would have a clear knock-on impact for the broader sector.
• The Hang Seng Property sub-index was -2.5%, while a BBG mainland property developer index shed ~7%.
• The tech sector also struggled, despite President Xi calling for an enhancement of the nation’s manufacturing sector with digital and information technologies to achieve high-quality development for “new industrialisation.”
• Elsewhere, we note that a PBoC MPC member flagged that there is less room for further expansionary monetary and fiscal policies as M2 has largely outpaced GDP growth and fiscal pressure from local governments has increased. This may have added further pressure to the space in the background.
• Still, a former senior NDRC official believes that there will be an easing in regulation that hinders consumption to boost the economy.
• News that Beijing asked some local governments for ’24 special bind issuance plans did little to placate worry, while further news re: the development of the strategic industry fund also failed to move the needle.
• Flow-wise, HK-China Stock Connect schemes saw net selling resume (~CNY8bn), more than reversing Friday’s net purchases. A reminder that Friday saw the largest round of net daily purchases since late July.