(Bloomberg) — A gauge of Chinese stocks listed in Hong Kong erased an earlier loss in volatile trading as investors debated whether weaker macro data will prompt the government to bolster stimulus.
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The Hang Seng China Enterprises Index was little changed after sliding as much as 1.3% in early trade. Property shares were among the biggest decliners, with a gauge of the sector dropping as much as 1.8%, while utility stocks rose. Mainland markets are shut until Wednesday for holidays.
Disappointing economic data over the weekend is adding pressure on the authorities to ramp up fiscal and monetary stimulus if the nation is to reach this year’s growth target. As deflation gets entrenched, investors are hoping the government will boost fiscal spending and or even try to directly help the consumer.
“Support from fiscal policy, which has lagged throughout 2024, could step up,” Wei He, an economist at Gavekal Research, wrote in a client note. “The government will probably introduce some additional stimulus measures in coming months.”
“Still, those measures are unlikely to convince market participants that nominal growth prospects are improving,” he said.
Failure to achieve the annual growth target may further undermine investor confidence, with overseas funds already pulling a record amount of money out of the country in the second quarter. A rebound in the nation’s equities earlier this year has lost momentum, with the CSI 300 Index closing at its lowest since 2019 last week. Declines may increase in absence of a forceful stimulus.
“The recent Chinese economic data paints a grim picture, with key indicators missing expectations and signaling heightened uncertainty for China equities,” said Manish Bhargava, chief executive officer at Straits Investment Management.
While aggressive stimulus may offer a short-term boost to equities, the authorities’ incremental measures to date have raised “doubts about the potential scale and effectiveness of future intervention,” he said.
Macro conditions in China have now turned so weak they…
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