Hong Kong Stocks Dip amidst Investor Dissatisfaction with China’s Ambiguous Fiscal Stimulus Plans

Shares in Hong Kong drop as investors show dissatisfaction with China's economic stimulus strategies. Finance Minister Lan Fo'an announced China's intention to increase their debt sales in an effort to mitigate risks associated with local governments.

The Hang Seng Index experienced a decrease of 0.8 per cent, closing at 21,092.87. Additionally, the Hang Seng Tech Index saw a drop of 1.4 per cent. Hong Kong's market was closed on Friday due to a public holiday. However, mainland indexes performed better: the CSI 300 Index increased by 1.9 per cent and the Shanghai Composite Index went up by 2.1 per cent.

During a weekend press briefing that attracted significant attention from investors, China's finance minister, Lan Fo’an, announced plans for a debt exchange scheme aimed at minimizing risks in local administrations. Lan also mentioned that these local governments have the option to issue bonds for the purchase of unsold properties, in an effort to maintain stability in the property market. Additionally, he indicated that sovereign bonds would be marketed to fund state-owned banks. Lan suggested that there could be more budgetary support for the economy, noting that China has the capacity to increase its budget deficit, however, he didn't provide any specific details regarding this.

"Without any specified monetary value, established schedule, or definite plan, investors are left hanging, probably until the following session of China's legislative body," stated Stephen Innes, who is the managing director at SPI Asset Management in Bangkok. "The absence of detailed information from the weekend seems like a typical instance of Beijing postponing the inevitable, and with a deflationary attitude starting to influence consumer habits, it's a potential catastrophe."

The declining inflation rate in China also impacted sentiments. The consumer inflation rate slowed down to 0.4 per cent in September, a decrease from the previous month's 0.6 per cent. In addition, producer prices dropped 2.8 per cent, marking a 24th consecutive month of decrease, as announced by the statistics bureau on Sunday.