(Bloomberg) — A gauge of Chinese stocks listed in Hong Kong fell after broadly weaker macro data dashed optimism of a meaningful rebound in the economy in the absence of comprehensive stimulus.
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The Hang Seng China Enterprises Index slid as much as 1.3%, snapping a two-day gain before trimming losses to be 0.5% lower. Alibaba Group Holding Ltd. and Xiaomi Corp. both dropped more than 1%. Mainland equity markets are shut until Wednesday for holidays.
Gauges of Chinese manufacturing, consumption and investment all slowed more than economists forecast, while the jobless rate rose, data showed Saturday. Failure to achieve the annual growth target may further undermine investor confidence, with overseas funds already pulling a record amount of money out of the country in the second quarter.
A rebound in the nation’s equities earlier this year has lost momentum, with the CSI 300 Index closing at its lowest since 2019 last week. Declines may increase in absence of a forceful stimulus.
“The recent Chinese economic data paints a grim picture, with key indicators missing expectations and signaling heightened uncertainty for China equities,” said Manish Bhargava, chief executive officer at Straits Investment Management.
While aggressive stimulus may offer a short-term boost to equities, the authorities’ incremental measures to date have raised “doubts about the potential scale and effectiveness of future intervention,” he said.
Macro conditions have now turned so weak they are challenging the argument about owning China equities due to their ulta-cheap valuations.
Valuations look tempting, but “when you look at macro, it is not there,” Ecaterina Bigos, chief investment officer for Asia excluding Japan at AXA Investment Managers, said in a Bloomberg TV interview. “Macro elements are very weak across the board.”
Investors need to see “some forceful and decisive measures from the government” to boost consumption, services and property before they will take the opportunity offered by cheap valuations, she said.
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