(Bloomberg) — Chinese stocks traded in Hong Kong appeared poised for losses on Monday, after a poor set of economic data increased skepticism about any near-term market recovery.
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Figures released on Saturday showed China’s factory output, consumption and investment all slowed more than forecast for August, while unemployment unexpectedly rose to a six-month high. House prices have fallen compared to the previous month.
The deterioration will put further pressure on stocks after a combination of a weak economy, modest profits and rising geopolitical tensions led to a months-long slump since May. As calls grow for Beijing to take stronger steps to revive growth, investors are questioning the longer-term attractiveness of Chinese stocks, with deep-rooted problems including state control over the private sector undermining their appeal .
Any response on Monday will focus on Hong Kong, as the mainland’s financial markets are closed until Wednesday for public holidays. The Hang Seng China Enterprises Index is down 13% from its May high. The CSI 300 Index, a benchmark for domestic stocks, fell last week to its lowest level since early 2019 and is heading for an unprecedented fourth annual loss.
“The fear is that the authorities are losing control of the economy and they won’t admit that,” said Gary Dugan, CEO of the Global CIO Office. “It looks like the market will go to a significantly lower level if there is no real, substantive new policy.”
Authorities have shown a reluctance to unleash large-scale fiscal stimulus since taking action to deflate the property bubble, leading to the current crisis. Support measures such as interest rate cuts and the purchase of exchange-traded funds by sovereign wealth funds have done little to revive sentiment.
The result was an exodus from the country’s stock markets. In total, some $6.8 trillion has been wiped from the market value of Chinese and Hong Kong stocks since peaking in 2021.
Saturday’s figures show that the main engine of China’s economy this year – supported by exports and government support – is losing steam. Industrial production grew more slowly than economists expected, extending the weakening into the fourth month, the longest stretch since September 2021.
The economic data “likely gives markets the feeling that the authorities are asleep at the wheel,” said Kyle Rodda, senior market analyst at Capital.Com Inc. in Melbourne.
The People’s Bank of China signaled last week that it will step up its fight against deflation and prepare additional policies to revive the economy, after credit data showed private confidence remained weak despite earlier interest rate cuts.
Yet stimulus can only go so far in China’s current business environment, according to veteran emerging markets investor Mark Mobius.
“The real problem is that the entrepreneurial drive is lacking and many businessmen are not willing to invest,” he said. “It will be necessary for the government to relax restrictions and regulations on private businesses so that the private sector can be stimulated and help the economy grow.”
–With assistance from April Mon.
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