2024-12-13 14:01:31 :
(Bloomberg) — Chinese stocks fell as authorities once again left investors speculating on the specifics of fiscal stimulus even as their key policy meeting vowed to boost consumption.
The onshore benchmark CSI 300 index closed down 2.4%, its worst day in three weeks. Friday’s losses led to a weekly loss of 1%, ending two consecutive weeks of gains on optimism about effective stimulus. An index of Chinese stocks listed in Hong Kong fell more than 2%.
In global markets, commodities that rely heavily on demand from China, from iron ore to copper, have also fallen. Meanwhile, benchmark yields on Chinese government bonds fell to record lows after authorities vowed to ease monetary policy further.
The lackluster appetite for risk assets suggests investors are still awaiting detailed measures after top leaders repeatedly and broadly pledged to revive the economy in recent months. While some economists said Beijing may have deliberately withheld policy details ahead of rising tensions in Donald Trump’s second term, the market reaction was a reminder that after several similar false dawns, Authorities face challenges in restoring investor confidence.
IG market strategist Jun Rong Yeap said, “More government borrowing, tolerance for larger fiscal deficits and more monetary easing next year are the main factors, but there is still a lack of policy details, which may still limit market gains. .”Asia Private Limited”Chinese authorities have been stuck in a more reactionary policy mode as uncertainty over U.S. tariff plans makes it difficult for policymakers to make any commitments.”
Senior officials led by President Xi Jinping pledged to raise China’s fiscal deficit target for next year following the annual Central Economic Work Conference that ended on Thursday. For the second time in at least a decade, they have made “vigorously boosting consumption” and stimulating domestic demand their top priority. Officials also vowed to strengthen the social safety net and made broad commitments to strengthen health care and pensions.
Traditionally, the December meeting provides only broad policy priorities and direction without revealing many details. Specific details such as growth targets or budgets will be announced during the annual legislative session in March.
Behind the latest sell-off is onshore investors’ decision to take profits after a recent rally, as there is likely to be no new policy catalyst for three months ahead of the annual meeting of the National People’s Congress. Meanwhile, there will be no further clarity on corporate earnings before the next earnings season begins in January.
After several disappointing policies, Beijing faces a growing challenge to impress investors. The rally that began in late September, following a central bank-led stimulus blitz, quickly ran out of steam amid a lack of follow-up measures. The CSI 300 Index has risen more than 30% in less than a month, but is still down more than 7% from its October high.
Hong Hao, chief economist at Grow Investment Group, told Bloomberg TV that “we should not be surprised if the fiscal deficit rises to 4% and above” in March. “There will be specific guidance on the issuance of special purpose Treasury bonds and very long-term Treasury bonds. So all in all, the budget deficit in the broader sense will be more than 10%.”
——With the assistance of Winnie Hsu.
(Updated with latest price changes)
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