No Index Follow Through After Initial Politburo-Inspired Rally

There was a lack of follow through when it came to Chinese equities, at least at the index level, as the post-Politburo bid ran out of steam, with participants waiting to see how forceful the loosely outlined economic support measures will be.

• Our policy team has noted that “China will hold off from major fiscal stimulus for the second half of the year, with authorities concentrating on making existing programmes more efficient in order to encourage market forces, given that the economy remains on track to meet its 5% growth target for 2023,” based on their discussions with advisors and analysts.
• Hong Kong-China northbound stock connect flows were essentially flat on the day (a light buying bias was seen) after the Politburo meeting triggered the largest round of net daily inflows via those channels since ’21.
• The benchmark CSI 300 ran below unchanged levels for the duration of Wednesday’s session, although losses were modest, with the index closing -0.2%. Still, BBG’s property developer sub-index logged a small advance, continuing to benefit from the seemingly impending policy easing surrounding the sector.
• A quick note that the post-Politburo CSI 300 rally failed to challenge the mid-June highs.