ASIA STOCKS: China & Hong Kong Equities Giving Back Earlier Gains

Chinese and Hong Kong markets opened higher today, driven by optimism over new measures to stabilize the stock market, however those gains are quickly being erased now with the CSI 300 Index up 0.90% now after earlier being up 1.50%, while China Enterprise Index up just 0.35% after earlier being up 1.6%. The gains come after Beijing announced initiatives such as boosting pension fund investments in listed companies and requiring mutual funds to increase onshore stock holdings by 10% annually for three years.

• China’s securities regulator announced a plan to guide more insurance funds into equities and expand the scale of equity funds to boost the stock market. The initiative aims to attract medium- and long-term capital by encouraging large state-owned insurers to increase A-share investments and raising the equity proportion in the National Social Security Fund and corporate annuities. Regulators will also enhance the investment ecosystem by promoting share buybacks and allowing multiple dividend distributions annually.
• China's property de-stocking initiative has gained traction, with December 2024 seeing slight price recoveries in first- and second-tier cities due to favorable policies, active second-hand home markets, and strong land auction results. Analysts emphasize balancing inventory reduction with optimizing new supply, such as repurposing old properties, to ensure market stability. Property benchmarks are under-performing today with Mainland Property Index -0.30%, HS Property Index -0.50%, while the BBG China Property Gauge is +0.10%
• Despite this optimism, concerns persist over China's sluggish economic recovery, the ongoing property slump, and potential tariffs from the U.S. Investors are closely monitoring consumption-related stocks ahead of the Lunar New Year holidays, with hopes that increased spending will support sectors like airlines, hospitality, and entertainment.