Market Sentiment Dampened by China’s Investment Plan
China’s latest effort to boost its stock markets through long-term investments has failed to impress investors, leading to a decline in Hong Kong stocks. The Hang Seng Index fell 0.5% to 19,686.62, while the Hang Seng Tech Index dropped 1.5%. The threat of tariffs from US President Donald Trump also weighed on sentiment.
Insurance Premiums to Fuel Onshore Markets
Starting this year, 30% of annual insurance premiums from new policy sales will be invested in China’s onshore markets, according to Wu Qing, chairman of the China Securities Regulatory Commission. This investment will increase by 10% every year over the next three years. At least 100 billion yuan (US$13.8 billion) of insurance funds will be allocated to the stock market in a pilot program within the first six months.
Impact on Mainland Large Caps
China’s policy moves could benefit some of the mainland’s large caps, as funds may increase positions in less volatile companies, according to Kai Wang, Asia equity market strategist at Morningstar. However, further fiscal policy clarity is needed, and excess real estate inventory must be addressed for the market’s recovery to be sustained.
Property Developers Take a Hit
Property developers were among the biggest losers, with CK Hutchison Holdings falling 2% to HK$39.20, Sun Hung Kai Properties easing 1.7% to HK$69.50, and Country Garden slumping 14.4% to HK$0.42.
Tech Stocks Also Affected
Semiconductor producer SMIC reversed gains to trade 6.7% lower at HK$39.30, while carmaker Li Auto dropped 3.3% to HK$87.70 and BYD lost 2.3% to HK$270.20.
Trump Effect Weighs on Sentiment
“I think it’s a Trump effect,” said Brock Silvers, chief investment officer at private equity investment firm Kaiyuan Capital in Hong Kong. “China’s current measures aren’t saving developers, which must eventually deal with an evolving business model likely leading to a smaller and less profitable sector.”
Asian Markets Mixed
Major Asian markets were mixed, with Japan’s Nikkei 225 advancing 0.9%, South Korea’s Kospi dropping 1.1%, and Australia’s S&P/ASX 200 falling 0.6%.
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