The Asian market was heavily influenced by Chinese economic data, which immediately confirmed a more moderate-than-expected slowdown. The Shanghai and Hong Kong stock exchanges performed mixed, reflecting a scenario in which positive export signals coexist with persistent weaknesses in the sector. Investors remain cautious, assessing whether the growth recorded in the second quarter will still be sufficient to offset the internal and external risks that continue to pressure the country.
Chinese stocks retreat, Hong Kong gains amid mixed growth data
China stocks dropped on Tuesday, while Hong Kong shares inched higher, as China’s economy slowed in the second quarter despite beating market forecasts, with persistent property sector weakness weighing on sentiment. China’s blue-chip CSI300 Index .CSI300 fell 0.5% by the lunch break, while the Shanghai Composite Index .SSEC lost 0.9%.
Hong Kong benchmark Hang Seng .HSI was up 0.2%, and Hang Seng Tech Index .HSTECH rose 0.4%. Data showed China’s gross domestic product grew 5.2% in the April-June quarter from a year earlier, slowing from 5.4% in the first quarter, but just beating analysts’ consensus expectations of a 5.1% rise in a Reuters poll.
Analysts said the U.S.-China trade truce and strong exports helped the world’s No.2 economy avoid a sharp slowdown. Meanwhile, property downturn remained a drag on overall growth, with investment in the sector falling 11.2% year-on-year in the first six months. In June, China’s new home prices fell at the fastest monthly pace in eight months, highlighting the weak demand. CSI 300 Real Estate .CSI000952 dropped 2%, while Hong Kong listed mainland developers .HSMPI declined 1.9% to lead the decline.
Market reacts to conflicting signals in the Chinese economy
Market didn’t move much as there are offsetting data, said Kai Wang, Asia equity market strategist, Morningstar. “For the bad news, consumption sales and housing prices, two key areas that required improvement, did not really show us any significant improvement,” Wang said.
However, U.S. tariffs have not affected China’s overall economy as feared thanks to resilient export data, he added. Meanwhile, the news that Nvidia will resume sales of its H20 artificial intelligence chip to China lifted cloud computing .CSI931469, 5G communications .CSI931079 stocks.
There’s a renewed appetite for technology-related assets in the country, fueled by the anticipation generated by new semiconductor deals. The news that Nvidia will resume sales of its H20 artificial intelligence chip in China boosted highly strategic sectors such as cloud computing and 5G communications. This scenario demonstrates that investor confidence remains in segments considered priorities for the country’s modern economy.
Gradual measures will be adopted in economic support
Goldman Sachs analysts said policymakers are unlikely to launch broad-based, significant stimulus at the July Politburo meeting, but they may implement incremental, targeted easing to help stem the property downturn and mitigate labor market pressures in the second half.
The Chinese government signals that any economic intervention should be selective. The country’s focus is on vulnerable sectors, such as real estate, but in a way that doesn’t require broad packages. According to market analysts, the priority will be to adopt specific actions that can help stabilize the labor market and thus prevent a decline in the construction industry and other sectors of the economy.
Crisis keeps pressure on the market
Following the Evergrande Group’s failed restructuring attempts, the perception of a crisis in the real estate sector has intensified, and it appears that it is still far from resolved. This situation is putting pressure on companies in the same segment and also raising doubts about the recovery of foreign investor confidence, a crucial factor in sustaining capital flows into the Chinese market.
Mixed economic data poses a persistent challenge for the real estate sector, and the Chinese market is heading for an unstable second half of the year, where the policy response may be a determining factor in determining the direction of investment.
GCN.com/Reuters