China’s stocks fall in Hong Kong and onshore markets as traders lock in gains after frenzy

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Hang Seng Index slipped 1.4 per cent, adding to its 9.4 per cent plunge on Tuesday, while the CSI 300 Index of onshore stocks sank 7.1 per cent

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A trader at a stock brokerage in Hangzhou on September 24, 2024. Photo: Getty Images

Zhang Shidongin Shanghai

Published: 10:07am, 9 Oct 2024Updated: 4:49pm, 9 Oct 2024

China’s stocks fell in volatile trading after an underwhelming press conference by the country’s economic planner poured cold water on two weeks of frenzied buying, raising questions about the strength and durability of the world’s biggest market rally.

The Hang Seng Index retreated 1.4 per cent to 20,637.24 in Hong Kong on Wednesday, after starting the day 1.7 per cent higher. The benchmark plunged 9.4 per cent a day earlier in its worst decline since 2008. The Hang Seng Tech Index slipped 1.2 per cent.

The CSI 300 Index, which tracks the biggest stocks listed on the Shanghai and Shenzhen exchanges, tumbled 7.1 per cent, erasing all of yesterday’s 5.9 per cent rally. All 10 industry groups in the gauge suffered losses. The pullback was the first setback for onshore equities since Beijing’s stimulus bazooka on September 24 fanned a US$3 trillion rush into bull market.

China’s world-beating stock rallies are beginning to show signs of exhaustion. Some analysts are worried the gains have come too much too soon, while the nation’s top planning body on Tuesday failed to deliver fresh fiscal measures that investors said are needed to shore up the ailing economy.

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Boom or bust: how sustainable is China’s stock frenzy?

China’s ability to deliver a big fiscal stimulus would be restrained by high levels of public debt, falling tax revenue and policy preference to investment over consumption, according to Morgan Stanley.

“Already wide fiscal deficits and high levels of public debt mean policymakers will be hesitant,” the US investment bank said in a report on Tuesday. “We see limited fiscal stimulus measures geared towards consumption in the near term.”