Hong Kong stocks stumble as investors await concrete support measures from Beijing

The Hang Seng Index slipped 0.5 per cent to 20,311.28 at the close. The Hang Seng Tech Index lost 1.4 per cent. On the mainland, the CSI 300 Index climbed 0.7 per cent and the Shanghai Composite Index added 0.6 per cent.

China’s bonds continued to rally, with the yield on the benchmark 10-year treasury note sliding by 7.6 basis points, the most in four years, to a record low of 1.855 per cent after Beijing pivoted to discussing looser monetary policies.

The Hang Seng Index surged almost 3 per cent on Monday after a readout of a Politburo meeting chaired by President Xi Jinping said China would adopt more proactive fiscal policies and “moderately loose” monetary policies next year to boost domestic demand. While it is seen as setting the tone for the economic work conference later this week, investors will need to see more concrete follow-up measures from Beijing before reviving the rally.

“China’s repeated declarations to stimulate its economy have largely not been followed by substantive actions,” said Stephen Innes, managing director at SPI Asset Management in Bangkok. “Despite promises made at the Politburo meeting in late September and reiterated in December to enhance fiscal spending and stabilise the real estate and stock markets, tangible results have been scarce. While pivotal in tone-setting, the … economic work conference is unlikely to deviate from this pattern by offering specific measures.”

The Politburo also used the phrase “moderately loose monetary policies” for the first time since 2010, when China was dealing with the aftermath of the global financial crisis. That compared with the “prudent monetary policies” wording that top policymakers have been using over the past few years. The rhetoric on the fiscal approach also shifted to “more proactive” from “proactive,” signalling that the government would raise the borrowing limit to spur domestic demand.