Sunday, December 22, 2024

Chinese Stocks Drop, Paring Weekly Gain as Fiscal Plans Awaited

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(Bloomberg) — Chinese stocks fell, reflecting caution before the conclusion of a key legislature meeting that investors hoped would unveil stronger stimulus.

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The onshore CSI 300 Index closed down 1% Friday. The benchmark rose 5.5% for the week, its best showing in about a month. A gauge of Chinese firms listed in Hong Kong also dropped nearly 1% at 3:37 p.m. local time.

The focus is now on a briefing later Friday by the budget committee of the National People’s Congress, China’s equivalent of parliament, and the Finance Ministry on a plan to allow local governments to refinance their off-balance-sheet debt. Whether policymakers will also use the occasion to announce additional fiscal spending will be of keen interest to investors.

The briefing comes as top legislators conclude a week-long meeting, a gathering that investors have hoped for authorities to roll out stronger economic support to counter the threat of tariffs under a second Donald Trump presidency. New stimulus measures may renew optimism that emerged Thursday after October’s robust exports helped offset concerns over slow investment growth and weak consumption.

“Although the threat of more tariffs looms with Trump 2.0, it may also accelerate China’s stimulus rollout, with China putting more of the dry fiscal powder to use now that the election result is confirmed,” said Marvin Chen, a Bloomberg Intelligence strategist.

The prospect of an expanded trade war during the US president-elect’s second term — even if it falls short of the threatened 60% tariff — is raising expectations for greater stimulus going into next year, as China braces for a new era of protectionism that could put harsher constraints on trade.

Such expectations have rekindled China’s stock rally, which lost steam in recent weeks following an initial surge in late September that came on the back of the central bank’s stimulus blitz. The CSI 300 surged nearly 35% from a September low through Oct. 8, but has fallen about 4% since.

Economists at Standard Chartered Plc and Macquarie project China’s growth would suffer a hit of as much as two percentage points should Trump follow through on his campaign vow to raise tariffs on Chinese goods to 60%.

Showing a sense of urgency, Chinese President Xi Jinping on Wednesday repeated a call for officials to step up efforts in the remaining two months of the year, so as to meet the nation’s annual economic targets.

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