Hong Kong stocks rise slightly as investors weigh China stimulus hopes, industrial profits

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Goldman Sachs analyst: ‘We expect more fiscal easing and believe it holds the key for the effectiveness of the ongoing stimulus package’

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Pedestrians walk past a sign showing the Hang Seng Index in Hong Kong on September 27, 2024. Photo: AFP

Zhang Shidongin Shanghai

Published: 10:28am, 28 Oct 2024Updated: 4:39pm, 28 Oct 2024

Hong Kong stocks edged up slightly as investors assessed the prospect of China’s fiscal stimulus after an official report showed deepening profit declines among industrial companies.

The Hang Seng Index rose less than 0.1 per cent to 20,599.36 at the close after sliding as much as 0.8 per cent. Longfor Group Holdings surged among Chinese property developers amid signs of a pickup in property sales in the first-tier cities, while PetroChina and CNOOC declined on slumping oil prices. The Hang Seng Tech Index gained 0.8 per cent.

Mainland China’s stock benchmarks also finished higher. The CSI 300 Index advanced 0.2 per cent, and the Shanghai Composite Index climbed 0.7 per cent.

China will convene a highly anticipated standing committee meeting of the legislative National People’s Congress from November 4 to 8, according to the Xinhua News Agency. The agenda includes a discussion on the country’s financial work, state asset management and a review of some law revisions. Investors have been expecting a change to the bond-issuance quota or government borrowing at the gathering.

“Following the larger-than-expected monetary easing, we expect more fiscal easing and believe it holds the key for the effectiveness of the ongoing stimulus package,” said Lisheng Wang, an analyst at Goldman Sachs in Hong Kong.

Legislators may approve a quota of as much as 2 trillion yuan (US$280.5 billion) of ultra-long special government bond issuance, scale up the local-government debt resolution plan by 6 trillion yuan and set a notably higher bond-issuance limit for next year, according the US investment bank.

In a baseline scenario, China may raise the official fiscal deficit ratio to 3.6 per cent in 2025 from 3 per cent this year, and fiscal expansion could be more aggressive should the likelihood of higher tariffs on Chinese goods increase after the US election result, it said.