Hong Kong stocks slide after China’s third plenum underwhelms, geopolitical angst weighs

The Hang Seng Index fell 2.1 per cent to 17,401.86 at the midday trading break. The Hang Seng Tech Index dropped 1.8 per cent but the Shanghai Composite Index added 0.1 per cent.

Property developer Longfor plunged 5.5 per cent to HK$10.74, while CK Holdings dropped 1 per cent to HK$40.45 and New World Development lost 3.2 per cent to HK7.64. Alibaba dropped 2.6 per cent to HK$73.85, while peers Baidu fell 1.5 per cent to HK$88.10 and Tencent trimmed 0.9 per cent to HK$365.80.

“We believe more demand-side easing measures – especially on the fiscal and housing fronts – are necessary to secure the full-year ‘around 5%’ real GDP growth target, and view the July Politburo meeting as a window for more easing rhetoric and measures,” said Goldman Sachs in a report.

The Party also stressed the need to maintain market order and correct market failures, reflecting Beijing’s concerns about risks in its financial system.

The communique was – as some economists expected – short and vague, with the full statement of the meeting to be released next week, said Lynn Song, Greater China chief economist at ING.

Many traders will look to the Politburo meeting at the end of the month for specific policy announcements, she added.

“In the end, whether or not China can successfully transition its economy to the next stage of development will depend on how effective policymakers are in achieving these long-term goals,” said Lynn Song.

Meanwhile investors are also mindful of geopolitical tensions between the world’s two biggest economies. Bloomberg reported, citing data from the US Department of the Treasury, Chinese investors dumped a net US$42.6 billion worth of long-term securities consisting of Treasury, agency and corporate bonds as well as equities in May. Sales in the first five months of this year totalled US$79.7 billion, an all-time high for the January-May period, it reported.

Other major Asian markets mostly fell tailing Wall Street’s tech-led sell-off. Australia’s S&P/ASX 200 fell 1 per cent while South Korea’s Kospi dropped 1.6 per cent. Japan’s Nikkei 225 fell 0.5 per cent.