(Bloomberg) — An index of Chinese stocks listed in Hong Kong fell after generally weaker macroeconomic data dashed optimism about a meaningful economic recovery in the absence of extensive stimulus measures.
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The Hang Seng China Enterprises Index fell as much as 1.3%, snapping a two-day gain before paring losses to 0.5% lower. Alibaba Group Holding Ltd. and Xiaomi Corp. both fell more than 1%. Mainland stock markets are closed until Wednesday for a holiday.
China’s manufacturing, consumption and investment all slowed more than economists had forecast, while the unemployment rate rose, data showed on Saturday. Missing the annual growth target could further undermine investor confidence, as foreign funds already withdrew a record amount of money from the country in the second quarter.
A rally in the country’s stocks earlier this year has lost momentum, with the CSI 300 Index closing last week at its lowest level since 2019. Declines could extend in the absence of strong stimulus.
“Recent Chinese economic data paints a bleak picture, with key indicators missing expectations and pointing to increased uncertainty for Chinese equities,” said Manish Bhargava, CEO of Straits Investment Management.
While aggressive stimulus measures could provide a boost to stocks in the short term, the authorities’ gradual actions so far have “raised doubts about the potential scale and effectiveness of future interventions,” he said.
Macroeconomic conditions have now become so bad that the argument for owning Chinese stocks is being questioned due to their extremely low valuations.
Valuations look tempting, but “if you look at macro, it’s not there,” Ecaterina Bigos, chief investment officer for Asia ex-Japan at AXA Investment Managers, said in an interview with Bloomberg TV. “Macro elements are very weak across the board.”
Investors need to see “some strong and decisive government action” to boost consumption, services and real estate before seizing the opportunity presented by cheap valuations, she said.
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