China’s Stimulus Update Disappoints, Sending Hang Seng Plummeting Amid Investor Worries
The anticipated rally in Chinese stocks, which initially surged following the Golden Week holiday, quickly lost momentum as the government's stimulus update failed to meet investor expectations. After the holiday break, the markets saw a sharp rebound, with shares rising by over 10%, driven by optimism about potential government actions to boost the slowing economy. However, as soon as the announcement from China’s National Development and Reform Commission (NDRC) came, the euphoria faded.
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During a highly watched press conference, the NDRC offered limited new information about fiscal support measures. While there was a promise of 200 billion yuan (roughly $28 billion USD) for investment projects by the end of the year, this did little to calm investors who were hoping for more aggressive or concrete actions. As a result, the Hang Seng Index in Hong Kong dropped by 5%, contrasting sharply with the Shanghai Composite Index, which maintained a 5% gain by late morning.
Investors were particularly disappointed by the absence of detailed plans addressing the critical issues facing China’s economy—chief among them, the ongoing property market crisis and sluggish consumer demand. Many had hoped that the government would introduce substantial fiscal measures or new economic reforms, but the lack of clarity left market participants feeling underwhelmed. Economists like Alicia Garcia-Herrero, from Natixis, noted that holding a press conference without delivering meaningful new stimulus only increased market frustration.
This stumble underscores the growing pressure on the Chinese government as it aims to meet its 5% annual growth target for 2024. With mounting concerns over whether existing policies will be enough to steer the economy away from a deeper slowdown, China may need to rethink its strategy to restore investor confidence and fuel sustainable growth.
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