Wednesday, May 29

China, HK equities slump as rate drop, Blinken visit disappoint 2023

China and Hong Kong equities declined on Tuesday, brought down by property and technology shares after the country cut benchmark lending rates less than anticipated and Antony Blinken’s visit to Beijing signaled little improvement in Sino-American relations.

The Shanghai Composite Index fell 0.5%, while the CSI300 Index of large-cap stocks fell 0.2%. The Hang Seng fell 1.5% on its worst trading day in nearly three weeks.

China lowered its key lending benchmarks on Tuesday to bolster a sluggish economic recovery, but the reduction was less than the market anticipated. ** Both the one-year and five-year loan prime rates (LPRs) were reduced by 10 basis points, although many expected a larger reduction to the five-year rate on which mortgage rates are based.

Rate reduction, Blinken visit disappoint China, HK stocks.

**Analysts at BofA global research wrote in a note, “Such marginal easing will probably help prevent growth from decelerating sharply, but is unlikely to provide a strong boost to reverse the growth slippage in the near future.” The Hang Seng Mainland Property Index fell 3.8% in a single day, the largest decline in a month. The index of China-listed developers declined 1.9%.

The absence of advancements during a rare visit to Beijing by U.S. Secretary of State Blinken also dismayed the market. During this visit, China and the United States agreed only to attempt to stabilize their intense rivalry to prevent it from escalating into conflict.

During the meeting, “China and the United States did not reach consensus on any major issues,” wrote Chinese political commentator Lu Kewen. There is also a significant disparity in the trajectory of Sino-American relations.

Technology stocks declined, ensnared in the conflict of Sino-American competition. The Hang Seng Tech Index dropped 2.5%, the most in six weeks.

The CSI defense index increased by 3.6%, bucking the trend and highlighting persistent geopolitical tensions. Despite the impending Dragon Boat Festival, which begins on Thursday, China’s tourism stocks and hotel operators also declined, a reflection of lackluster consumer sentiment.

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