Downpayment Lowering & PBoC Liquidity Boosts, Before Deficit Talk Limits Gains

Benchmark China-related indices were mixed on the day, with the CSI 300 shedding 0.3% and the Hang Seng adding 2.4% (the latter was up more than 3% at one point).

• Looser downpayment requirements for houses in Beijing & Shanghai allowed HK-listed property developer names to surge (+3.5%), while the mainland equivalent saw more modest, albeit still healthy gains (+1.5%).
• A record level of net PBoC MLF cash injection also aided sentiment early in the session.
• Mixed economic activity data (firmer-than expected industrial production and softer-than-expected retail sales) did little to dent sentiment, with trend improvements eyed.
• Most attributed the pullback from best levels to a RTRS source report noting that “Chinese leaders agreed at an annual meeting on the economy this week to run a budget deficit of 3% of GDP in 2024, while other fiscal support may be covered by off-budget debt.”
• Worry re: continued fiscal prudence (at least through the headline budget lens) seemed to dent sentiment, even with the mention of potential support via off-budget measures.
• On the same front, our Beijing policy team’s latest piece pointed to a steady GDP growth target of around 5% next year, with a narrower fiscal deficit compared to this year (3.0-3.5%/GDP).
• At a more granular level, brokerages benefitted from the CSRC pointing to a speeding up of the reshaping of the financial sector.
• The rally wasn’t participated in (at least in net terms) by foreigners using the HK-China Stock Connect schemes, with CNY4.2bn of net mainland outflows lodged there (4/5 of this week’s sessions saw net sales via those channels).