Hong Kong & China Equities Head Lower, On Lack Of Policy Support

The China and Hong Kong markets experienced declines on Monday as investor sentiment soured amid a weak macroeconomic outlook and heightened geopolitical tensions. The Shanghai Composite Index and CSI 300 Index both faced significant losses, with the Shanghai index set to erase its year-to-date gains. Similarly, the Hang Seng Index in Hong Kong fell to its lowest levels in nearly two months, driven by a lack of significant policy support and disappointing economic data.

• Hong Kong equities are lower today with the HSI Index dropping 1.20% heading towards its lowest close since April 30, the HSTech Index also declined by 1.95%, in the property space the Mainland Property Index dropped 1.51%, while the HS Property Index fell 1.18% Investor sentiment was further dampened by the lack of fresh supportive measures and underwhelming economic data, including a 28.2% drop in foreign direct investment from January to May.
• In mainland China, the Shanghai Composite Index fell as much as 1.1%, its most significant drop since June 11. The CSI 300 Index dropped as much as 0.7%, and was less than 2% away from erasing its year-to-date gains. The MSCI China Index is also nearing a similar milestone, being about 5% away. Broader market indices faced even sharper declines, with the CSI 1000 and CSI 2000 indices falling by 2.61% and 3.51%, respectively. The CSI 300 Real Estate Index decreased by 1.87%, while the ChiNext Index was down by 0.67%.
• Property space, Kaisa Group Holdings, a Chinese developer facing liquidation in a Hong Kong court, must demonstrate progress in restructuring its $11 billion debt. Despite defaulting on offshore bonds over two years ago, Kaisa has yet to present a public restructuring plan. This week, several Chinese property companies, including DaFa Properties, Shimao Group, and Redsun Properties, also face court hearings amid the ongoing property debt crisis. Recent government measures to rescue the sector have had limited impact, with many firms' dollar notes trading at deeply distressed levels.
• China and the European Union have agreed to start talks on the EU's plans to impose tariffs of up to 48% on Chinese electric vehicles, following EU investigations into alleged unfair trade practices. This agreement was reached during a video conference between Chinese Commerce Minister Wang Wentao and EU Trade Commissioner Valdis Dombrovskis, with further discussions expected in the coming weeks to avoid a tariff war.
• Looking ahead, it is a quiet week for China, while Hong Kong has trade balance data on Tuesday