Hong Kong stocks cap monthly loss as traders look to potential China stimulus, US election

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Investors shrug off China manufacturing report, look to possible stimulus from legislative meeting and outcome of US election next week

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People passed Exchange Square in Central. Photo: Reuters

Zhang Shidongin Shanghai

Published: 10:25am, 31 Oct 2024Updated: 5:11pm, 31 Oct 2024

Hong Kong stocks fell, leaving the city’s benchmark at a loss for the month, as investors looked beyond a sign of improvement in China’s manufacturing sector to focus on potential fiscal stimulus from a legislative conclave and the outcome of the US presidential election next week.

The Hang Seng Index dropped 0.3 per cent to 20,317.33 at the close, reversing from a gain of as much as 0.8 per cent. For the month, the benchmark was down 3.9 per cent. Electric-vehicle maker BYD slumped after Morgan Stanley said its profit per vehicle was below expectations, while Industrial and Commercial Bank of China gained after reporting a higher quarterly profit.

The Hang Seng Tech Index retreated 0.3 per cent. Benchmarks on the mainland inched up: the CSI 300 Index climbed less than 0.1 per cent and the Shanghai Composite Index was 0.4 per cent stronger.

Traders are gearing up for action next week. In China, the National People’s Congress Standing Committee is expected to approve fiscal stimulus measures that are highly anticipated by traders, and the US presidential election is a nail-biter race between Donald Trump and Vice-President Kamala Harris. Trump has threatened to impose 60 per cent tariffs on all Chinese imports if he is elected, while Harris is expected to tighten restrictions on hi-tech exports to the mainland.

“We’ll need to see if the stimulus roll-out can lead to a recovery in domestic demand to offset a potentially softer external demand picture, which could be even less favourable if we do see a Trump victory next week and a subsequent escalation of tariffs,” said Lynn Song, an economist at ING.

China’s official manufacturing purchasing managers’ index (PMI) rose to 50.1 in October from 49.8 last month, the National Bureau of Statistics said on Thursday. That beat economists’ expectations; a reading of 50 and above indicates expansion and below that shows a contraction in the sector.