Hong Kong Equities Lead Sell-Off As Investors Concerns Grow

Chinese and Hong Kong equity markets are lower today, declining more than 1% as optimism over Chinese government stimulus plans waned, investors also remain cautious ahead of major central bank rate decisions from the BoJ, BOE & the Fed this week. The Chinese Politburo meeting will be closely watched for any potential stimulus measures, but sentiment remains bearish due to the ongoing property downturn and subdued consumer demand. China's bonds have rallied again with 10-year yields hitting record lows, which poses a challenge for the central bank as it tries to balance boosting growth with easing measures and avoiding financial instability.

• Hong Kong equities are lower across the board today, Real Estate Benchmarks are all lower with (Mainland down 1.75%, and HS Property down 1.50%), the HSTech Index is about 1.40% lower today, while the BBG Asia Semiconductor Index is off earlier lows and trades just 0.30% lower, the wider HSI is trading 1.10% largely inline with other major benchmark indices
• China onshore equities are lower although, slightly better than HK listed stocks, small-caps are again the best performers after the PBoC lowered rates last week with the CSI 1000 down 0.30%, while the CSI 2000 is 0.75% The CSI 300 Real Estate Index is down 1% today and 7.70% for the past 5 sessions, major benchmarks such as the CSI 300 are down about 0.90%
• Investors pulled significant amounts of cash from ETFs with heavy exposure to Chinese stocks during the week ending July 26. The Vanguard FTSE Emerging Markets ETF which holds 25% of its assets in China, experienced over $506 million in redemptions, marking its largest weekly outflow in over four years. Additionally, the iShares MSCI China ETF saw its biggest weekly outflow on record, as per BBG. In China, upcoming economic data, particularly on manufacturing activity, will be closely watched for indications of the country’s economic health and potential further support measures from the central bank. Investors have grown cautious around Chinese stocks after a lack of policy updates came from the Third Plenum meeting, while at the same time the China National Team look to have slowed their purchases of benchmark indices post the meeting.
• China will stop publishing daily data on overseas fund flows into and out of its stock market starting August 18, 2024, instead providing such information quarterly. This move follows earlier efforts to limit data on intraday flows with Hong Kong and aims to bolster confidence amid significant outflows of global funds. Real-time data for mainland China to Hong Kong flows will still be available, per BBG.
• Looking ahead China PMI and Hong Kong GDP is expected on Wednesday