Hong Kong stocks fall, traders unimpressed with China’s fiscal stimulus plans

The Hang Seng Index fell 0.8 per cent to 21,092.87 at the close. The Hang Seng Tech Index slid 1.4 per cent. Hong Kong’s market was shut for a public holiday on Friday. Mainland benchmarks fared better: the CSI 300 Index climbed 1.9 per cent and the Shanghai Composite Index added 2.1 per cent.

At a weekend news conference that was closely monitored by investors, finance minister Lan Fo’an said China would conduct a debt swap programme to help mitigate risks at the local government level. He also said those local governments can issue bonds to buy unsold homes to stabilise the property market and sovereign bonds would be sold to capitalise state-owned banks. Lan also hinted at more fiscal support for the economy, saying China has room to raise the budget deficit, though he wasn’t more specific on that point.

“There was no dollar figure, timeline, or clear road map. Investors are left in limbo, waiting for more clarity, likely until the next meeting of China’s legislature,” said Stephen Innes, managing director at SPI Asset Management in Bangkok. “The lack of specifics over the weekend feels like a classic case of Beijing kicking the can down the road, and with a deflationary mindset creeping into consumer behaviour, that’s a recipe for disaster.”

China’s deflationary trend also weighed on sentiment. Consumer inflation decelerated to 0.4 per cent in September from 0.6 per cent for the previous month, while producer prices fell 2.8 per cent for a 24th straight month, the statistics bureau said on Sunday.