Chinese Markets Dip Post-Economic Conference Outcomes

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Disappointing Economic Meeting Outcomes

Chinese stocks witnessed a downturn as investors processed the outcomes of the annual economic work conference. The key takeaway from the meeting was the lack of emphasis on the real estate sector and the absence of a large-scale economic stimulus, which led to the Hang Seng China Enterprises Index falling by as much as 0.9%. Moreover, the CSI 300 benchmark, which represents onshore shares, also experienced a decline of 0.8%.

During the conference, China’s top leaders decided to concentrate on industrial policy and technological innovation rather than implementing bold rescue measures for the property sector, which has been in a slump. Despite policymakers pledging to meet the financing needs of property developers, ensure employment for certain groups, and maintain ample liquidity, the market response was tepid. A Bloomberg Intelligence gauge showed that developer shares have lost nearly half their value so far in the year.

Analysts like Hao Hong, chief economist at Grow Investment Group, commented on the outcomes: “There was no surprise from the conference,” and he further elaborated that the focus on security and risk as well as high-quality development implies that “at this stage high quality growth trumps fast growth.”

Asian Stocks Retreat Before Federal Reserve Meeting

In the broader Asian market, stocks retreated ahead of the Federal Reserve’s final meeting of the year. This was driven by risk aversion and uncertainty surrounding the central bank’s outlook. China’s economic growth has been weak, with a deepening disinflationary trend contributing to the sustained losses in local stocks. November saw Chinese disinflation worsen, signaling an extended economic slowdown in Asia’s biggest economy.

In contrast, Japan’s Nikkei 225 rose by 0.5%, continuing its upward trajectory into a third session, bolstered by the belief that the Bank of Japan will maintain its ultra-loose monetary policy for a longer period. Meanwhile, Australia’s ASX 200 increased by 0.4%, with Sigma Pharmaceuticals Ltd seeing a significant rally after a merger agreement with Chemist Warehouse Group.

Indian stocks also faced a downturn, retreating from record highs due to a sharp rise in CPI inflation in November, driven mainly by higher food prices. This inflationary uptick poses a risk to the fastest-growing major economy in the world and is in line with the Reserve Bank of India’s warnings about a potential resurgence in inflation.

Equity Market Impacts and Analyst Insights

The equity market felt the impact of the Central Economic Work Conference’s focus on defusing risks and stimulating domestic demand, with less attention given to the property sector. The CSI 300 Index and Shanghai Composite Index both saw declines, as did Hong Kong shares, including the Hang Seng Index and the Hang Seng China Enterprises Index.

Analysts from Goldman Sachs noted the absence of new statements around property, while Citigroup Inc analysts are expecting weak property sales in December. Most sectors, particularly liquor and real estate stocks, experienced declines. Hong Kong-listed tech giants also dipped by 0.8%.

A senior Communist Party official suggested that China should set its 2024 fiscal deficit and special local government bonds at appropriate levels and optimize the structure of fiscal spending. This indicates a possible shift in policy focus towards fiscal adjustments rather than direct intervention in the property market.

The market’s response to the recent economic conference highlights investor concerns over China’s economic direction, particularly in the absence of significant stimulus measures or support for the real estate sector. As the global financial community awaits the Federal Reserve’s meeting and its implications for monetary policy, the sense of caution is palpable across Asian markets.

This article is for informational purposes only. It does not offer financial advice, and readers should conduct their own research before making investment decisions. The author and publisher are not responsible for any actions taken based on the information presented.