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China&#39;s 2024 economic objectives stir mixed reactions among local and foreign investors, with mainland stocks surging and Hong Kong stocks falling.

China&#39;s 2024 Economic Targets Drive Wedge Between Domestic And Offshore Equities

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Chinese stocks drop despite interest rate cut, as market remains pessimistic amid broader tech downturn and uncertain Fed policies.

Chinese Stocks Decline Despite Aggressive Banking Move To Revitalize Troubled Property Sector

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China&#39;s Hainan province reduces down payment for first-time homebuyers to 20%, aiming to stabilize slumping housing market. Goldman Sachs predicts prolonged downturn.

China&#39;s Hainan Province Eases Mortgage Rules To Revive Home Sales: &#39;Housing Bottom Not In Sight,&#39; Analyst Says

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iShares MSCI Hong Kong Index Fund is trading higher amid strength in Chinese stocks.

China unveiled its economic objectives for the year at the 2024 National People's Congress, stirring diverse reactions across equity <a href="https://www.benzinga.com/topic/china">indices tracking Chinese stocks. </a>
While domestic Chinese stocks have displayed signs of optimism, rallying in response to the government&#8217;s announcements, offshore Chinese equities, accessible to foreign investors, experienced a notable decline.
Beijing announced a GDP growth target of around 5%, coupled with a consumer price index (CPI) inflation ceiling of 3%, more than 12 million new urban jobs, and an unemployment rate of 5.5%. 
<h4 class="wp-block-heading">Disappointment In Fiscal Policy</h4>
Notably, officials announced a planned 3% on-budget deficit ratio, a decrease from last year&#8217;s revised figure of 3.8%. This move has left foreign investors feeling underwhelmed, as they hoped for more substantial fiscal efforts to stimulate the recovery.
The government&#8217;s plans to allocate RMB 3.9 trillion in local government special bonds – a marginal increase from RMB 3.8 trillion in 2023 – alongside RMB 1 trillion in central government special bonds – a notable shift from none issued between 2021 and 2023&nbsp;– failed to significantly bolster foreign sentiment.
Xin-Yao Ng, an investment director at Abrdn Asia Ltd., said that based on current information, government spending doesn&#8217;t appear to offer a significant boost to the economy, disappointing foreign investors. 
Goldman Sachs suggests that policymakers remain committed to prioritizing economic growth this year, as evidenced by their ambitious growth target and unchanged CPI inflation target. However, the upcoming release of the fiscal budget report within the next 1-2 days will provide further insights into the effective fiscal budget ratio and the key areas of spending focus.
The Market Divide: Local vs. Foreign Sentiment
This cautious fiscal approach has led to a divergent performance in the equity markets. 
On the one hand, mainland Chinese markets such as the CSI 300 and the China A50 Index have experienced gains, reaching their highest levels since late November 2023. 
Contrarily, the Hang Seng Index, as tracked by the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>), heavily skewed towards foreign participations, suffered its worst daily performance since mid-January 2024, falling 2.6% on Tuesday. 
Shares of Alibaba Group Holding Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>) trading in Hong Kong fell 3.3%, while JD.com Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/JD#NASDAQ">JD</a>) fell over 7% ahead of Wednesday&#8217;s earnings report. 
Chart: Onshore Chinese Stocks Surge, While Foreign-Accessible Hang Seng Index Falls 
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="495" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/03/05094551/image-1-3-1024x495.png" alt="" class="wp-image-239556" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/03/05094551/image-1-3-1024x495.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/03/05094551/image-1-3-300x145.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/03/05094551/image-1-3-768x372.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/03/05094551/image-1-3-1536x743.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/03/05094551/image-1-3.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
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China's 2024 Economic Targets Drive Wedge Between Domestic And Offshore Equities

Chinese stocks trading in the U.S. market witnessed a notable decline on Tuesday, even as the People&#8217;s Bank of China (PBoC) took steps to bolster its <a href="https://www.benzinga.com/topic/china">faltering real estate sector.</a>
What Happened: The bank cut the five-year prime loan rate by 25 basis points to 3.95% on Tuesday, surpassing expectations of a modest 15 basis points reduction. 
This marks the most substantial rate cut since the introduction of the five-year loan prime rate in 2019. It also represents the first-rate reduction since June 2023.
China maintains the one-year rate at 3.45%, contrary to the anticipated 15 basis points decrease, setting both rates at historical lows.
Why It Matters: Beijing&#8217;s reducing interest rates and releasing more liquidity are an attempt at revitalizing the real estate sector.
Recall how Evergrande defaulted in 2021. The collapse led to a cash crisis across China's real estate sector. Today, Evergrande has over $300 billion in liabilities.
China's southern province of Hainan recently reduced the down-payment ratio for first-time homebuyers <a href="https://www.benzinga.com/markets/asia/24/02/37203536/chinas-hainan-province-eases-mortgage-rules-to-revive-home-sales-housing-bottom-not-in-sight-analyst">from 25% to 20%.</a> 
Market Reaction: The iShares China Large-Cap ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXI#NYSE">FXI</a>) experienced a decrease of 0.8%. The iShares MSCI Hong Kong ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>) saw a reduction of 1%. Among individual stocks, e-commerce giant JD.com Inc. experienced the most significant drop, declining by 4.4%. 
Electric vehicle company Nio Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NIO#NASDAQ">NIO</a>) also faced a substantial decrease of 3.8%, reflecting broader market pessimism towards EV manufacturers.
Other prominent Chinese companies, including Baidu Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BIDU#NASDAQ">BIDU</a>), Alibaba Group Holding Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>), and PDD Holdings Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/PDD#NASDAQ">PDD</a>), also encountered declines.
The downturn in Chinese equities was partly attributed to the broader negative trends impacting U.S. tech stocks Tuesday. Nvidia Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NVDA#NASDAQ">NVDA</a>) experienced a more than 5% drop ahead of its earnings release, prompting investors to reassess high valuations. 
The Federal Open Market Committee (FOMC) minutes on Wednesday and forthcoming remarks from Federal Reserve officials are expected to provide clues on the potential timeline for U.S. interest rate reductions. 
Currently, money markets are leaning towards a cumulative rate cut of one percentage point in 2024. The expectation is for four quarter-point reductions. That&#8217;s a revision from the previously anticipated five cuts before a recent <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/02/37203996/why-these-2-wall-street-economists-not-too-concerned-by-januarys-hot-inflation-main">hotter-than-expected inflation report.</a>
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China&#8217;s southern province of Hainan has announced a reduction in the down-payment ratio for first-time homebuyers. 
This policy adjustment, making it easier for individuals to purchase their first homes, sets the minimum down payment at 20%, a decrease <a href="https://www.benzinga.com/topic/china">from the previous 25%</a>. 
The announcement, first revealed by Hainan Daily and then reported by <a href="https://www.bloomberg.com/news/articles/2024-02-19/china-s-hainan-cuts-down-payment-for-first-home-buyers?srnd=economics-v2&amp;sref=TBDibEcD">Bloomberg</a>, follows similar easing measures in major cities like Beijing and Shanghai, aiming to counteract the country&#8217;s significant housing sales slump.
Stabilizing the Market Amidst a Housing Downturn
The adjustment comes amid a series of relaxations in mortgage policies across the nation, aimed at boosting slumping home sales. These efforts have seen a notable increase in home sales in Beijing and Shanghai after the implementation of reduced down-payment ratios and the easing of qualifications for lower mortgages.
However, the overall real estate market in China continues to face challenges, with the new-home market experiencing subdued sales. This is contrasted by a surge in transactions of existing homes during the Spring Festival holiday, although daily average sales of new homes in 25 major cities have seen a significant decrease of 27% by area compared to the previous year.
This policy change in Hainan, which had previously reduced the down-payment requirement from 30% to 25% in October, underscores the ongoing efforts to address the unprecedented downturn in the housing market. With a population of 10 million, Hainan&#8217;s move is part of a wider strategy to inject vitality into the real estate sector and provide a pathway for recovery.
Goldman Sachs Weighs In: A Prolonged Housing Downturn
In a note published Sunday, Goldman Sachs&#8217; chief China economist Hui Shan said that the Chinese housing bottom is still &#8220;not in sight.&#8221; 
According to Shan, the current housing downturn in China, when compared to the U.S. 2007-09 subprime crisis, reveals that real house prices nationwide have declined by 16% from the third quarter of 2021 to the third quarter of 2023. 
This decrease represents approximately half of the peak-to-trough decline experienced during the U.S. crisis. Despite the fundamental differences between the housing markets of the two countries, Shan emphasizes that housing downcycles tend to persist for years. 
The economist underscores the importance of policy interventions to mitigate negative spillovers, such as foreclosures and financial stresses in the U.S., and developer defaults and local government spending cuts in China&#8217;s context.
On Monday, the Hong Kong&#8217;s Hang Seng Index, a barometer for offshore Chinese stocks and monitored through the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>), fell over 1% after surging as much as 2.5% on Friday. 
Read now: <a href="https://www.benzinga.com/markets/asia/24/02/37197714/chinas-domestic-tourism-spending-outpaces-pre-pandemic-levels-during-lunar-new-year-celebrations">China&#8217;s Domestic Tourism Spending Outpaces Pre-Pandemic Levels During Lunar New Year Celebrations</a>
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China's Hainan Province Eases Mortgage Rules To Revive Home Sales: 'Housing Bottom Not In Sight,' Analyst Says

Emerging markets fund manager Mark Mobius on Friday offered his take on the underperforming Chinese and <a href="https://www.benzinga.com/24/02/36935323/weekly-market-recap-volatility-in-hong-kong-us-earnings-surge-fed-influences-bonds">Hong Kong markets </a>and potential investment opportunities.
Turning The Corner? People have now begun comparing the Chinese and Hong Kong markets with India, which has seen a huge run-up, and see there is an opportunity for the former two to outperform, said Mobius, the founder of Mobius Capital Partners. The emerging-market investment guru <a href="https://www.bloomberg.com/news/videos/2024-02-09/mobius-some-china-stocks-started-meeting-his-criteria-video">shared</a> his views in an interview with Bloomberg.
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="750" height="650" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/14033054/newplot-51.png" alt="" class="wp-image-215313" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/14033054/newplot-51.png 750w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/14033054/newplot-51-300x260.png 300w" sizes="(max-width: 750px) 100vw, 750px" /></figure>
Source: Benzinga
&#8220;I am not predicting that but I think people are beginning to look at the valuations and beginning to think that perhaps it&#8217;s gonna be a good opportunity there,&#8221; the investment manager said. 
Delving into the criteria for screening stocks, Mobius said his firm uses return on assets and return on capital, which he termed as very important. He also said he would look into earnings per share growth. 
&#8220;We like companies with low debt,&#8221; Mobius said.
&#8220;Some of the stocks in China and Hong Kong are beginning to beat on some of those criteria.&#8221;
See Also: <a href="https://www.benzinga.com/24/02/36935323/weekly-market-recap-volatility-in-hong-kong-us-earnings-surge-fed-influences-bonds">Best Chinese Stocks</a>
Mobius also disagreed with the view that the weakness in Hong Kong and China is due to Chinese authorities&#8217; problems with their messaging to the global markets. &#8220;Chinese officials are trying their best to regain confidence,&#8221; he said. 
&#8220;At the end of the day, it is the Chinese investors who drive the Chinese market, not foreign investors, so the first order of business will be for them to instill confidence in Chinese investors&#8217; minds.&#8221;
Mobius sees a return of confidence among Chinese investors once the housing problem is over but he cautioned that it will take some time. He said that Chinese investors have a lot of money in their property more than in the stock market. If the property situation improves, then money would go flowing into the stock market, he added.
Given the ailing property market and disinflation in China, the appropriate strategy for investors in the domestic market is to keep an eye on the U.S. interest rate, the fund manager said. The possibility of the Fed cutting rates is positive for emerging markets generally, and for China as well, because one of the problems is the higher interest rates Chinese property investors have to face.
EM Index Vs. Individual Stocks: Mobius said he wouldn&#8217;t buy an emerging market index but would look at individual markets. The emerging markets index has performed so badly because of China, he said. Even if one were to consider an index, it should be an emerging market index, excluding China, he added.
But Mobius warned about the demerits of leaving out China. &#8220;China may pick up and then you lose that opportunity. But I pick individual stocks to begin with,&#8221; he said. &nbsp;
While sharing the interview on X, formerly Twitter, Mobius elaborated his views further. &#8220;As the Chinese saying goes, &#8216;where there is risk, there is opportunity,&#8217; Whenever a stock market takes a dive, one thing comes to my mind: time to go shopping for hidden gems at a steal,&#8221; he said.
&#8220;With Hong Kong's market at a multi-year low, I&#8217;m starting to see value in some local stocks.&#8221;
Why It&#8217;s Important: China, one of the biggest drivers of global economic growth, has been hampered further by the stock market downturn. Sensing the lurking danger, Chinese authorities have orchestrated their willingness to implement measures to prop up the stock market that has been spiraling downward.
U.S.-listed Chinese large-cap stocks such as Alibaba Group Holding Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>), JD.com, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/JD#NASDAQ">JD</a>), Baidu, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BIDU#NASDAQ">BIDU</a>), and Tencent Holdings Limited (OTC:<a class="ticker" href="https://www.benzinga.com/stock/TCEHY#OTC">TCEHY</a>) took a hit even ahead of the domestic stock market swoon.
Threatened by the massive scale of operation of these companies, the Communist regime took steps to rein them in, as they were seen to be monopolizing the business areas they were operating in. <a href="https://www.benzinga.com/analyst-ratings/analyst-color/22/07/28270934/alibaba-down-9-5-as-chinese-regulators-pressure-jack-ma-to-cede-control-of-ant-fina">Alibaba, for one, has been feeling the pinch since mid-2020.</a>
<figure class="wp-block-image size-full is-resized"><img loading="lazy" decoding="async" width="750" height="650" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/14033958/newplot-52.png" alt="" class="wp-image-215324" style="width:800px;height:auto" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/14033958/newplot-52.png 750w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/02/14033958/newplot-52-300x260.png 300w" sizes="(max-width: 750px) 100vw, 750px" /></figure>
Source: Benzinga
The domestic stock market swoon has stalled any fightback by these stocks despite their oversold levels.
The iShares MSCI China A ETF (CBOE: CNYA) ended Friday down 0.42% at $24.88 and the iShares MSCI Hong Kong ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>) fell 1.73% to $15.92, according to <a href="https://benzinga.grsm.io/lxquj26b2sag">Benzinga Pro data.</a>
Read Next: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/02/37028937/is-chinas-stock-market-poised-for-a-turnaround-analyst-points-to-3-promising-signs-">Is China&#8217;s Stock Market Poised For A Turnaround? Analyst Points To 3 Promising Signs Amid Policy Shifts</a>
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Emerging Markets Guru Says 'Time To Go Shopping For Hidden Gems At A Steal' As He Sees Opportunities In Bruised Chinese, Hong Kong Stocks

A Hong Kong court handed down a liquidation order against China Evergrande Group on Monday, initiating the dissolution of what was once China&#8217;s <a href="https://www.benzinga.com/markets/asia/24/01/36818748/chinas-evergrande-shares-halted-as-hong-kong-court-orders-liquidation-of-worlds-most-indebted-develo">biggest real estate developer.</a>
This move signals a critical turning point for the debt-laden giant, sparking spillover concerns across the financial community.
Evergrande&#8217;s shares took an immediate hit following the court&#8217;s ruling, plummeting 21% to just 16 cents in Hong Kong dollars before a suspension in trading. This significant drop in share price is a far cry from its 2017 peak market value of HK $414 billion, now dwindled to merely HK $2.15 billion. 
Evergrande CEO Shawn Siu said &#8220;the company has made all efforts possible and is sorry about the winding-up order." He maintained a commitment to clients and the company's continuity, emphasizing, "The company will ensure home deliveries and steadily promote normal operation of the group." Siu also confirmed plans to work alongside the appointed liquidator in managing the fallout.
Alvarez &amp; Marsal Inc. stepped in as the appointed overseer, a firm recognized for handling Lehman Brothers&#8216; restructuring.
Evergrande&#8217;s Fallout: Assessing The Economic Impact
The decision, while not unforeseen, sends a chilling message to the markets and the property sector in China, which is already navigating turbulence.
According to Andreas Steno Larsen, an independent macro economist, the court ruling on Evergrande was largely anticipated given the company&#8217;s well-documented financial woes.
&#8220;This ruling doesn't come as a surprise to the markets,&#8221; Larsen said, adding that the government&#8217;s reluctance to intervene in the company's $300-billion debt crisis has been mirrored in Evergrande's declining share price. He anticipates Beijing will likely introduce additional policy measures and economic incentives to alleviate market instability.
<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"> 
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<blockquote class="twitter-tweet" data-width="500" data-dnt="true">FREE Evergrande Update&#8230; Popping the World's Largest Asset Bubble.. Evergrande has now formally transitioned from a state of de facto default to a legal liquidation. How will the markets and Beijing act to the latest ruling? More -&gt; <a href="https://t.co/Y8cV8Pb6Gc">https://t.co/Y8cV8Pb6Gc</a> <a href="https://t.co/2Rh1uDlPDi">pic.twitter.com/2Rh1uDlPDi</a>
&mdash; AndreasStenoLarsen (@AndreasSteno) <a href="https://twitter.com/AndreasSteno/status/1751953439783846399?ref_src=twsrc%5Etfw">January 29, 2024</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></div>
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Bloomberg reported the negative news is expected to impact the already shaky confidence of Chinese homebuyers, who are increasingly hesitant to invest in new homes from private developers due to <a href="https://www.bloomberg.com/news/articles/2024-01-29/what-does-evergrande-s-liquidation-order-mean-quicktake-q-a?sref=TBDibEcD">fears of incompletion.</a>
Gary Ng, a senior economist at Natixis SA, highlighted the broader implications of the liquidation, noting its likely psychological impact. 
&#8220;The macroeconomic impact should be limited as the liquidation itself is unlikely to exert more pressure on the battered property sector,&#8221; Ng explained, but cautioned, &#8220;It will worsen sentiment as investors will be worried about a snowball effect on other pending cases.&#8221;
Crispus Nyaga, a financial analyst from Invezz, weighed in on the discussion with a forward-looking view, specifically addressing the situation of another troubled property developer, Country Garden. He stated that &#8220;Country Garden is in a similar situation that Evergrande was in before its collapse,&#8221; indicating that due to its heavy debt and poor ratings from credit agencies, it's likely that Country Garden might also face liquidation in the coming months. 
Market Reactions
The fallout from the Evergrande liquidation hasn&#8217;t triggered substantially negative reactions across Chinese-related assets so far, suggesting that investors might have already factored in the potential consequences.
Hong Kong&#8217;s Hang Seng Index, often a barometer for investor sentiment toward Chinese offshore entities and tracked by the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>), closed 0.8% higher on Monday. 
Conversely, mainland Chinese shares experienced a slight dip, with the Shanghai Shenzhen CSI 300 Index falling by 0.9%. This modest drop may reflect more localized concerns about the impact of Evergrande&#8217;s liquidation on the domestic market, albeit without widespread panic.
As for Chinese companies listed in New York, the premarket trading session paints a mixed picture. E-commerce titan Alibaba Group Holdings Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>) edged up by 0.7%, while the retailer giant PDD Holdings Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/PDD#NASDAQ">PDD</a>) saw a sharper decline of 3.3%. 
Other major firms like JD.com, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/JD#NASDAQ">JD</a>), electric vehicle maker NIO Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NIO#NYSE">NIO</a>), and tech giant Baidu Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BIDU#NYSE">BIDU</a>) remained mostly flat. 
Read now:<a href="https://www.benzinga.com/markets/asia/24/01/36758819/chinese-stocks-rally-as-beijing-goes-all-in-on-financial-support-squeezes-short-sellers"> Chinese Stocks Rally As Beijing Goes All-In On Financial Support, Squeezes Short Sellers</a>
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Evergrande Liquidation's 'Snowball Effect': What's Next For China's Troubled Real Estate Sector?

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Financial Times Reported Elon Musk's AI Start-Up Seeks To Raise $6B From Investors To Challenge OpenAI

Chinese equities recorded their most robust performance on Wednesday in several months, buoyed by Beijing&#8217;s commitment to inject financial stimulus into the weakened economy and implement regulations designed to restrict short selling of <a href="https://www.benzinga.com/topic/china">the nation&#8217;s entities.</a>
This uptick follows rumors that emerged on Tuesday about the government&#8217;s plans to deploy approximately 2 trillion yuan ($279 billion), largely sourced from state enterprises&#8217; offshore accounts, with the aim of bolstering equity purchases via <a href="https://www.benzinga.com/markets/asia/24/01/36738324/chinas-market-rescue-a-bold-278-billion-stabilization-plan-in-play-amid-deepening-crisis">a stock connect link</a>.
<h3 class="wp-block-heading">What Happened: Bold Moves to Stimulate the Economy</h3>
The People&#8217;s Bank of China (PBOC) announced a reduction in the reserve requirement ratio (RRR) for all banks by 50 basis points, bringing it down to 10% effective Feb. 5. This move is expected to inject up to one trillion yuan ($139.45 billion) into the market, marking the lowest RRR level since March 2007. This strategic decision aligns with the PBOC&#8217;s ongoing efforts to bolster the economic recovery amid declining stock markets.
Additionally, the China Securities Regulatory Commission (CSRC) has reportedly been in talks with several hedge fund managers, pressing them to limit short selling in the <a href="https://www.benzinga.com/markets/asia/24/01/36752362/chinas-securities-regulators-urge-hedge-funds-to-curb-short-selling-amid-market-turmoil-report">stock index futures market.</a> According to Reuters, short interest on U.S.-listed Chinese stocks and Hong Kong stocks has seen a sharp decline, dropping 15% in the 30 days leading up to Jan. 22, as per data from S3 partners.
Hong Kong shares of Alibaba Group Holdings Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>) saw a remarkable increase of 7.9% on Tuesday, reaching their highest level since Jan. 4. This surge followed reports of substantial share purchases by co-founder Jack Ma and Chairman Joe Tsai in the fourth quarter. Consequently, the company&#8217;s U.S.-listed shares experienced a near 8% jump on Tuesday.
<h3 class="wp-block-heading">Why It Matters: A Market In Recovery Might Be In Sight</h3>
The Chinese stock market has experienced a substantial decline, losing about a third of its value in the past year. Currently, it stands as one of the most undervalued markets globally, based on traditional valuation metrics. The forward price-to-earnings ratio for the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>) is now at 11x, significantly lower than its historical average.
Read also:<a href="https://www.benzinga.com/markets/asia/24/01/36719713/januarys-bargain-hunt-this-chinese-asset-is-up-for-sale-at-a-30-discount-trap-or-treasure"> January&#8217;s Bargain Hunt: This Chinese Asset Is Up For Sale At 30% Discount — Trap Or Treasure?</a>
Kiyong Seong, Societe Generale&#8217;s lead Asia macro strategist, acknowledges the unexpected scale of the 50 bp cut but suggests a cautious approach, waiting for a comprehensive set of policy supports to assess their overall market impact. Ihor Dusaniwsky, managing director of predictive analytics at S3, points out a trend of continued short covering, hinting at a potential short-term recovery in Chinese markets.
<h3 class="wp-block-heading">Market Reactions: Chinese Stocks Soar</h3>
Following these announcements, the Hong Kong Hang Seng Index, a gauge for offshore Chinese stocks, rallied as much as 3.6% on Wednesday, adding to a 2.6% surge on Tuesday. 
This marks the strongest 2-day performance since November 2022. The domestic Chinese shares, as indicated by the CSI 300 Index, also witnessed a rise of 1.4%.
Chart: Hong Kong Index Marks Strongest 2-Day Rally Since November 2022
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="495" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/24094645/HSI_2024-01-24_13-46-32_64309-1024x495.png" alt="" class="wp-image-192543" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/24094645/HSI_2024-01-24_13-46-32_64309-1024x495.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/24094645/HSI_2024-01-24_13-46-32_64309-300x145.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/24094645/HSI_2024-01-24_13-46-32_64309-768x372.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/24094645/HSI_2024-01-24_13-46-32_64309-1536x743.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/24094645/HSI_2024-01-24_13-46-32_64309.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
In premarket trading on Wednesday, the Franklin FTSE Hong Kong ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FLHK#NYSE">FLHK</a>) showed an 8.2% increase, while the iShares MSCI Hong Kong Index Fund and the iShares China Large-Cap ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXI#NYSE">FXI</a>) rose by 2.5% and 3.8% respectively.
Shares of Alibaba Group Holdings Ltd. saw a 2% increase. Similarly, Baidu Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BIDU#NASDAQ">BIDU</a>) shares were up by 2.8%, following a 7.5% gain the previous day.
Read now: <a href="https://www.benzinga.com/news/24/01/36752515/us-seeks-chinas-support-in-curbing-iran-backed-houthi-attacks-in-red-sea-but-beijing-remains-silent">US Seeks China&#8217;s Support In Curbing Iran-Backed Houthi Attacks In Red Sea, But Beijing Remains Silent</a>
Photo: Shutterstock

Government

Regulations

Short Sellers

FLHK

Chinese Stocks Rally As Beijing Goes All-In On Financial Support, Squeezes Short Sellers

&#8220;Enough is enough.&#8221; This is likely the sentiment that Chinese authorities should have expressed recently, given the sharp drop in their country&#8217;s stock market value over the past year, coupled with Hong Kong-traded stocks plummeting to levels not seen since <a href="https://www.benzinga.com/markets/asia/24/01/36719713/januarys-bargain-hunt-this-chinese-asset-is-up-for-sale-at-a-30-discount-trap-or-treasure">the summer of 2009.</a>
What Happened: Chinese authorities are reportedly preparing a substantial rescue package to stabilize the floundering stock market. Insiders familiar with the matter revealed to <a href="https://www.bloomberg.com/news/articles/2024-01-23/china-mulls-stock-market-rescue-package-backed-by-278-billion?srnd=premium&amp;sref=TBDibEcD">Bloomberg</a> that Chinese policymakers intend to assemble a stabilization fund of about 2 trillion yuan ($278 billion). 
This fund will primarily draw from the offshore accounts of Chinese state-owned enterprises and aims to purchase shares onshore through the Hong Kong exchange link. 
Additionally, at least 300 billion yuan of local funds will be channeled to invest in onshore shares via entities like China Securities Finance Corp. and Central Huijin Investment Ltd.
Read Also: <a href="https://www.benzinga.com/news/earnings/24/01/36734767/us-stocks-prepare-for-nervy-start-ahead-of-netflix-ti-earnings-analyst-says-cash-waiting-on-sidelin">US Stocks Prepare For Nervy Start Ahead of Netflix, TI Earnings: Analyst Says Cash Waiting On Sidelines Could Flood Street If This Happens</a>
Why It Matters: This move underscores a heightened sense of urgency among Chinese officials to curb a market selloff that pushed the benchmark CSI 300 Index to a five-year low. 
Foreign investors have unmistakably exited the Chinese equity market, as evidenced by the more pronounced declines in Chinese stocks traded on the Hong Kong&#8217;s Hang Seng index compared to domestic shares. 
The establishment of a stabilization fund could be perceived as a lifeline during this protracted crisis, potentially serving as a much-needed turning point. 
Bloomberg Intelligence strategist Marvin Chen suggests that while the proposed support package might stabilize markets in the short term, sustained improvement will require additional measures.
<h3 class="wp-block-heading">Chinese Stocks Rally</h3>
Hong Kong&#8217;s Hang Seng index, as tracked by the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>), witnessed a substantial surge of 2.6%, marking its most robust performance since mid-November. 
Onshore Chinese stocks, represented by the CSI 300 index, closed with a modest gain of 0.4%. Simultaneously, the offshore yuan strengthened by 0.4% against the US dollar. 
In premarket trading Wednesday, Chinese stocks listed on US exchanges showed significant increases, with Alibaba Group Holdings Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>) rising by 3%, PDD Holdings Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/PDD#NASDAQ">PDD</a>) by 2.5%, Baidu Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BIDU#NASDAQ">BIDU</a>) by 2.8%, NIO Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NIO#NASDAQ">NIO</a>) by 3.9%, and Li Auto Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LI#NASDAQ">LI</a>) by 4.5%.
Read Now: <a href="https://www.benzinga.com/economics/macro-economic-events/24/01/36732969/chinas-growth-stumbles-but-it-still-offers-enormous-advantages-for-investors-says">China&#8217;s Growth Stumbles But It Still Offers &#8216;Enormous Advantages&#8217; For Investors, Says Expert</a>
Image: Shutterstock

China's Market Rescue: A Bold $278 Billion Stabilization Plan In Play Amid Deepening Crisis

China, the world&#8217;s second-largest economy by gross domestic product (GDP), is grappling with a crisis in its domestic real estate sector and spillover effects have cast a shadow over the performance of <a href="https://www.benzinga.com/topic/china">its offshore stock market.</a>
What Happened: BlackRock Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BLK#NYSE">BLK</a>) is speeding up the sale of an office complex in Shanghai at a 30% discount to its purchase price due to the sluggish property market in the Chinese largest city.
The property, Bloomberg <a href="https://www.bloomberg.com/news/articles/2024-01-22/blackrock-tries-to-sell-shanghai-office-towers-at-30-discount?sref=TBDibEcD">reported</a>, consists of two towers at Waterfront Place. It was purchased in 2018 from PGIM Real Estate for approximately 1.2 billion yuan ($167 million). It is part of a real estate investment fund managed by BlackRock and offers 27,805 square meters (299,290 square feet) of office space. 
New home prices in China experienced their sharpest decline in December, marking the largest drop since February 2015, as Reuters reported last week. 
Additionally, property sales, measured by floor area, saw a significant 23% decrease in December compared to the same period in the previous year.
Read Also: <a href="https://www.benzinga.com/news/24/01/36711124/nvidia-ceo-jensen-huang-reportedly-makes-first-china-visit-in-four-years-amid-escalating-tech-rivalr">Nvidia CEO Jensen Huang Reportedly Makes First China Visit In Four Years Amid Escalating Tech Rivalry With US</a>
<h2 class="wp-block-heading">Chinese Offshore Shares Widen Discount To Onshore Counterparts</h2>
Offshore-listed Chinese stocks are often considered a more accurate indicator of the health of China&#8217;s economy and broader investor sentiment. These stocks listed in both Hong Kong and New York have recently experienced a significant widening of their discount when compared to stocks listed domestically in Shanghai or Shenzhen, reflecting a widespread pessimism on Chinese equities available to global investors. 
Redmond Wong, a market strategist at Saxo Capital Markets HK Ltd., told <a href="https://www.bloomberg.com/news/articles/2024-01-22/china-stock-selloff-worsens-as-hong-kong-index-nears-19-year-low?srnd=premium&amp;sref=TBDibEcD">Bloomberg</a> that a considerable number of investors in Hong Kong-listed stocks, known as H shares, are overseas institutional funds. Many of these funds have shifted their investments away from Hong Kong to other Asian markets, including Japan.
Over the past year, both the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>) and the iShares MSCI China ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MCHI#NYSE">MCHI</a>) have seen declines by a third of their value. These two benchmarks for Chinese stocks are currently trading at their lowest levels since 2011.
The relative strength of the Hang Seng Index, a key indicator of Hong Kong-listed stocks, compared to the Chinese domestic CSI 300 index — which tracks the performance of the top 300 stocks traded on the Shanghai and Shenzhen Stock Exchanges — has now reached levels not seen since April 2009. 
When compared to the 5-year average level, offshore Chinese stocks currently trade at a 36% discount compared to their domestic onshore counterparts, highlighting a significant performance gap between these two market segments.
<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="495" src="https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/22114147/HSI_000300_2024-01-22_15-41-24_78165-1024x495.png" alt="" class="wp-image-189724" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/22114147/HSI_000300_2024-01-22_15-41-24_78165-1024x495.png 1024w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/22114147/HSI_000300_2024-01-22_15-41-24_78165-300x145.png 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/22114147/HSI_000300_2024-01-22_15-41-24_78165-768x372.png 768w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/22114147/HSI_000300_2024-01-22_15-41-24_78165-1536x743.png 1536w,https://editorial-assets.benzinga.com/wp-content/uploads/2024/01/22114147/HSI_000300_2024-01-22_15-41-24_78165.png 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
This contrast is also prominently observed when examining individual stocks. 
The two largest constituents of the CSI 300 index are Kweichow Moutai Ltd (600519) and Ping An Insurance (Group) Of China (601318). The two firms experienced smaller declines over the year: Kweichow Moutai down 13% and Ping An Insurance was down 23%. 
In contrast, the two largest offshore stocks, Tencent Holding Ltd (OTCPK: TCEHY) and Alibaba Group Holdings Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>), have seen more substantial declines of 33.6% and 43.2%, respectively.
Read Now: <a href="https://www.benzinga.com/markets/asia/24/01/36654679/trump-says-chinas-stock-market-crashed-after-i-won-iowa-but-analyst-differs-i-dont-think-the-drop-is">Trump Says China&#8217;s Stock Market &#8216;Crashed&#8217; After &#8216;I Won Iowa,&#8217; But Analyst Differs</a>

MCHI

January's Bargain Hunt: This Chinese Asset Is Up For Sale At 30% Discount — Trap Or Treasure?

Bonds issued in U.S. dollars by China&#8217;s troubled real estate developer Country Garden Holdings Co. Ltd. (OTC:<a class="ticker" href="https://www.benzinga.com/stock/CTRYF#OTC">CTRYF</a>) soared on Tuesday after the company made a last-minute interest payment following the <a href="https://www.benzinga.com/markets/asia/23/09/34213260/chinas-top-developer-country-garden-races-to-avert-an-evergrande-like-scenario">end of the grace period.</a>
<h2 class="wp-block-heading">Grace Period Drama</h2>
After missing the $22.5 million coupon payments on two $500 million bonds in August, Country Garden Holdings settled the payment on Sept. 5, just before the 30-day grace period deadline, successfully avoiding a default that could have sent shockwaves through China&#8217;s fragile property sector.
The bond, set to mature in January 2024 with a semi-annual coupon of 8%, saw an astonishing 20% jump in value on Tuesday, after the developer avoided a default. 
However, it closed at a still precarious 14 cents on the dollar, underscoring the persistent threat of a looming debt default.
Also Read: <a href="https://www.benzinga.com/news/23/09/34225601/nikolas-burning-issue-continues-with-3rd-truck-fire-this-year-heres-what-happened">Nikola&#8217;s Burning Issue Continues With 3rd Truck Fire This Year: Here&#8217;s What Happened</a>
Chart: Country Garden Holdings Company Limited 8.000% 27Jan2024
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="769" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/05082623/XS188044271_2023-09-05_14-24-05_29bef-1024x769.png" alt="" class="wp-image-100906" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/05082623/XS188044271_2023-09-05_14-24-05_29bef-1024x769.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/05082623/XS188044271_2023-09-05_14-24-05_29bef-300x225.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/05082623/XS188044271_2023-09-05_14-24-05_29bef-768x577.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/05082623/XS188044271_2023-09-05_14-24-05_29bef.png 1438w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Market Response</h2>
On Monday, the company&#8217;s Hong Kong-listed shares had soared 15% as the developer received creditor approval to extend payments on a 3.9 billion yuan ($540 million) onshore private bond over the next three years, providing some breathing room.
However, despite avoiding a default on Tuesday, shares of Country Garden traded in Hong Kong closed 1% lower, highlighting lingering concerns about the company&#8217;s future. 
Despite narrowly avoiding a technical default, industry experts express reservations about the company&#8217;s long-term outlook. J.P. Morgan analysts caution that with 18 billion yuan in bond servicing due by year-end and continuing weak sales, the risk of default, distressed exchange, or potential restructuring is on the ascent
Zerlina Zeng, a senior credit analyst at CreditSights, echoes these concerns in an interview with <a href="https://www.bloomberg.com/news/articles/2023-09-04/country-garden-has-just-days-to-avoid-default-on-dollar-bonds?sref=TBDibEcD">Bloomberg</a>, emphasizing that Country Garden&#8217;s recent actions haven&#8217;t substantially improved its financial standing. She suggests that the company&#8217;s future hinges on a sustained increase in home sales, which currently seems challenging.
<h2 class="wp-block-heading">Not Out Of The Woods</h2>
Country Garden grapples with a staggering debt load of $187 billion, earning the distinction of being the world&#8217;s most indebted developer. The company&#8217;s extensive projects across markets, including mainland China, Australia, Indonesia, Hong Kong, and the U.S., are under scrutiny.
The broader market sentiment reflected Country Garden&#8217;s struggles, as the Hang Seng Index, tracked by the iShares MSCI Hong Kong Fund Index (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>) tumbling 2.06% on Tuesday, underscoring concerns about China&#8217;s faltering economic recovery.
The nation&#8217;s service activity gauge, as assessed by the Caixin Services PMI, further eased to 51.8 in August 2023, largely missing market expectations of 53.6 and underscoring the lowest rate of expansions since the start of the year. 
Country Garden&#8217;s last-minute bond payment may have bought them time, but the broader challenges facing China&#8217;s real estate sector remain unresolved, leaving investors cautiously watching Beijing&#8217;s future moves.
Read now: <a href="https://www.benzinga.com/news/earnings/23/09/34228904/s-p-500-nasdaq-futures-hint-at-soft-start-post-labor-day-as-fed-speeches-loom-analyst-flags-2-marke">S&amp;P 500, Nasdaq Futures Hint At Soft Start Post-Labor Day As Fed Speeches Loom: Analyst Flags 2 Market Worries</a>
Photo: Shutterstock

Bonds

CTRYF

China's Country Garden Skirts Default, Dollar Bond Spikes 20%: Unresolved Risk Remains

While the U.S. markets are closed for the Labor Day holiday, the announcement of stimulus measures in China is ushering in a much-needed relief rally for equities in both the <a href="https://www.benzinga.com/topic/china">Hong Kong and mainland China markets.</a>
Conversely, growing economic concerns in Europe are raising cautionary flags among investors, suggesting that the era of robust corporate profits may be fading. 
In the currency market, both the euro and pound were up slightly, gaining 0.2% and 0.3% respectively. WTI crude hit a 9-month high at over $86/barrel on Monday, up 0.6%, buoyed by rising Chinese demand prospects and OPEC+ supply concerns. Gold held steady at $1937/oz. 
<h2 class="wp-block-heading">Chinese Stocks Soar Amidst Government&#8217;s Commitment to Stimulus</h2>
On Monday, the Hang Seng Index, as tracked by the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>) surged by 2.51%, gaining 462.1 points to close at 18,844.2, reaching a three-week-high. This increase followed Beijing&#8217;s move to permit its major cities to decrease initial payments for homebuyers and incentivize lenders to reduce interest rates on current mortgages. Economists from Morgan Stanley also suggested that China may implement fiscal policy easing and address local debt concerns in the coming months.
Notably, Country Garden Holdings Co. Ltd. (OTCPK: CTRYY), a troubled developer facing a grace period ending on Sept. 5-6 for $22.5 million in due interest, obtained creditor approval over the weekend to extend a yuan bond&#8217;s maturity, resulting in a substantial 14.6% increase in its stock value.
Other top-performing offshore Chinese stocks included China Resources Land Ltd. (OTCPK: CRBJY) with a 9.7% increase, Semiconductor Manufacturing International Corp with a 9.4% gain, and China Overseas Land &amp; Investment (OTCPK: CAOVY) up 8.3%. Additionally, Tencent Music Entertainment Group (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TME#NYSE">TME</a>) led gains among large-cap Chinese tech stocks. 
Chinese electric car manufacturers NIO Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NIO#NYSE">NIO</a>), Xpeng Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XPEV#NYSE">XPEV</a>), and Li Auto Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LI#NASDAQ">LI</a>) successfully met their vehicle delivery targets, aligning with their third-quarter guidance.
The CSI 300 Index, representing onshore China shares, closed up 1.5%, adding to its previous Friday&#8217;s gains.
Also Read: <a href="https://www.benzinga.com/general/entertainment/23/09/34203186/new-twist-in-disney-vs-desantis-mouse-house-now-wants-to-scale-down-federal-lawsuit-against">New Twist In Disney Vs DeSantis: Mouse House Now Wants To Scale Down Federal Lawsuit Against Florida Governor</a>
Chart: Offshore Chinese Stocks Post Best-Performing Session In Over A Month
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="769" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04122919/HSI_2023-09-04_18-28-46_56240-1024x769.png" alt="" class="wp-image-100266" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04122919/HSI_2023-09-04_18-28-46_56240-1024x769.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04122919/HSI_2023-09-04_18-28-46_56240-300x225.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04122919/HSI_2023-09-04_18-28-46_56240-768x577.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04122919/HSI_2023-09-04_18-28-46_56240.png 1438w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Europe Struggles To Hold Gains As Economic Fears Resume</h2>
Major European stock markets ended the day in the red, with the pan-European Euro Stoxx 50 Index, as tracked by the SPDR DJ Euro STOXX 50 ETF&nbsp;&nbsp;(NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FEZ#NYSE">FEZ</a>), closing down 0.2%, marking its fourth consecutive session in negative territory.
In July 2023, Germany&#8217;s trade surplus fell to €15.9 billion from June&#8217;s €18.7 billion, missing market expectations of €18 billion. This drop resulted from a 0.9% decline in exports and a 1.4% surge in imports compared to the previous year.
Last week, the Euro Area&#8217;s economic sentiment indicator in August 2023 dropped for the fourth consecutive month to 93.3, falling short of the expected 93.7 and marking its lowest level since November 2020. Additionally, Germany&#8217;s manufacturing PMI remained unchanged at 39.1 in August 2023, the second-lowest reading since May 2020.
Among stock movers, Mercedes-Benz Group AG (OTCPK: MBGAF) led with a 1% gain as it unveiled its new Concept CLA Class, a significant move into the electric vehicle market. The car boasts a range of 750 kilometers (466 miles) on a single charge and a 15-minute charging time. Other top performers included ASML Holding N.V. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/ASML#NASDAQ">ASML</a>), up 0.8%, and Adidas AG (OTCPK: ADDYY). 
Conversely, Compagnie de Saint-Gobain (OTCPK: CODYY) was down 3.2%, and RWE AG (OTCPK: RWEOY) was down 2%, ranking among the day&#8217;s worst performers.
Meanwhile, Danish health-care giant Novo Nordisk A/S (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NVO#NYSE">NVO</a>) hit fresh all-time highs as the company launched its Wegovy&#8217;s weight-loss drug in the UK. 
Chart: Euro Stoxx 50 Index&#8217;s Bull Run Is Now Halted
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="769" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04125347/FESX1_2023-09-04_18-53-33_f3a14-1024x769.png" alt="" class="wp-image-100270" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04125347/FESX1_2023-09-04_18-53-33_f3a14-1024x769.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04125347/FESX1_2023-09-04_18-53-33_f3a14-300x225.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04125347/FESX1_2023-09-04_18-53-33_f3a14-768x577.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/09/04125347/FESX1_2023-09-04_18-53-33_f3a14.png 1438w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">Key Data To Monitor This Week In The US </h2>
The upcoming week in the United States is expected to be relatively quiet in terms of economic data releases. 
The spotlight will be on Wednesday&#8217;s flash estimate of the ISM Services PMI for August. Economists anticipate a slight dip in the key service activity gauge from 52.7 to 52.5, although it is expected to remain in expansionary territory.
Other data to monitor include: 
<ul>
<li>July&#8217;s Factory Orders (Tue.): -2.5% month-on-month expected</li>
<li>IBD/TIPP Economic Optimism For September (Tue.): 41.1 expected; 40.3 previous</li>
<li>July&#8217;s Balance of Trade (Wed.): -$68 billion expected</li>
<li>MBA 30-Year Mortgage Rate (Wed.): 7.31% previous</li>
<li>Initial Jobless Claims For The Week Ending Sept. 2, 2023: 233,000 consensus, 228,000 previous</li>
</ul>
Read more: <a href="https://www.benzinga.com/news/23/09/34210604/musk-agrees-nobody-in-the-future-will-be-using-this-driving-feature">Musk Agrees &#8216;Nobody&#8217; In The Future Will Be Using This Driving Feature</a>
Photo: Shutterstock

Eurozone

Market-Moving Exclusives

ADDYY

ASML

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China Rallies, Europe Dips: US Market Outlook For Labor Day-Shortened Week

In a bid to stem the mounting challenges within its real estate sector, China&#8217;s central bank, the People&#8217;s Bank of China, has launched an array of measures aimed at revitalizing the market and mitigating the cascading negative effects reverberating through both the <a href="https://www.benzinga.com/topic/china">financial sector and real economy. </a>
Nevertheless, these actions have yet to yield the desired outcomes, raising concerns among investors.
China&#8217;s financial regulators made headlines on Thursday with a series of moves targeted at boosting the troubled property market. Notably, they have slashed down-payment requirements for both first-time and second-time home buyers and concurrently lowered interest rates on existing mortgages. 
The announcement, jointly made by the People's Bank of China and the National Administration of Financial Regulation, stipulated that the minimum down payment would stand at 20% for first-time buyers and 30% for second-time buyers, according to information shared <a href="https://www.bloomberg.com/news/articles/2023-08-31/china-lowers-down-payment-mortgage-rate-in-stimulus-push?srnd=premium&amp;sref=TBDibEcD">by</a> Bloomberg.
Furthermore, the central bank endorsed a reduction in the interest rates on existing mortgages for primary homes, a decision it anticipates will alleviate interest expenses for borrowers and potentially stimulate consumption and investment, as emphasized in an official statement from the People&#8217;s Bank of China.
<h2 class="wp-block-heading">Latest Policy Actions In China</h2>
In a directive sent to major state-owned banks earlier this week, the world&#8217;s second-largest economy mandated significant decreases in bank deposit and mortgage rates. 
To further encourage domestic stock investors, China has also&nbsp;announced a reduction of stamp taxes on stock trading of 50%.
In August, <a href="https://www.benzinga.com/markets/asia/23/08/33964523/chinas-rate-change-causes-market-panic-big-dive-in-hong-kong-stocks">China&#8217;s one-year loan prime rate</a> (LPR) was lowered to a record low of 3.45%, while the five-year rate was left unchanged.
Read also: <a href="https://www.benzinga.com/markets/asia/23/08/34087652/china-takes-drastic-measures-to-shield-economy-from-real-estate-storm">China Takes Drastic Measures To Shield Economy From Real Estate Storm</a>
<h2 class="wp-block-heading">Market Reactions: Investors Are Still Unsatisfied</h2>
Despite these moves, the response from investors is less than enthusiastic. 
Major stock indices in Hong Kong, as tracked by the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>), faced a decline of 0.4% on Thursday, marking a consecutive session in the red. In mainland China, the Shanghai Stock Exchange witnessed a similar downtrend of 0.5%.
Chinese stocks listed on U.S. exchanges showed a mixed performance during the morning trading session in New York. E-commerce giant Alibaba Group Holdings Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>) experienced a dip of 0.5%, while retail heavyweight JD.com Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/JD#NASDAQ">JD</a>) suffered a notable drop of 2%. Search engine major Baidu, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BIDU#NASDAQ">BIDU</a>) was not spared either, seeing a decrease of 1.2%. The music streaming company Tencent Music Entertainment Group (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TME#NYSE">TME</a>) managed to post a gain of 1%.
Delving into the electric vehicle (EV) sector, Li Auto Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LI#NASDAQ">LI</a>) held steady, while NIO Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NIO#NYSE">NIO</a>) witnessed a positive upswing of 0.7%.
Read now: <a href="https://www.benzinga.com/government/23/08/34141093/baidu-and-bytedance-unveil-ai-chatbots-setting-stage-for-rivalry-with-microsoft-google">Baidu and ByteDance Unveil AI Chatbots, Setting Stage for Rivalry with Microsoft, Google</a>
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
 Photo: Shutterstock.

Chinese Central Bank Vows Mortgage Rate Cuts: Investors Respond With 'Not Enough'

China is pulling out all the stops in response to the brewing storm within its real estate sector, aiming to prevent the cascading impact from reaching <a href="https://www.benzinga.com/topic/china">other sectors and economies. </a>
On a recent note, the world&#8217;s second-largest economy has issued a directive to prominent state-owned banks, mandating substantial reductions in both bank deposit and mortgage rates, as reported by <a href="https://www.bloomberg.com/news/articles/2023-08-29/china-to-cut-rates-on-existing-mortgages-as-soon-as-today?srnd=premium-europe&amp;sref=TBDibEcD">Bloomberg</a>.
<h2 class="wp-block-heading">Bank Rate Cuts And Stimulus Plans</h2>
The mortgage rate cuts, which are set to reverberate across a market worth $5.3 trillion, are exclusively targeted at loans for primary residences, in an attempt to cushion the fallout in the housing market. 
Simultaneously, the Chinese government is taking shelter behind promises of amplified stimulus measures to drive growth and employment within the country. The recent surge in youth unemployment to over 20% has prompted the authorities to kick into action. 
A translated document by the official Xinhua News Agency reveals that Finance Minister Liu Kun and Zheng Shanjie, the chairman of the National Development and Reform Commission, have made commitments to expedite the issuance and utilization of local government special bonds to invigorate investments. 
Also Read:<a href="https://www.benzinga.com/trading-ideas/long-ideas/23/08/34081190/tesla-reverses-course-indicates-a-new-bull-run-could-be-on-the-horizon-the-bull-bear-cas"> Tesla Reverses Course, Indicates A New Bull Run Could Be On The Horizon: The Bull, Bear Case For The EV Giant.</a>
The report highlights the insufficient domestic demand and challenges confronting certain businesses, indicating a necessity to stimulate private investments via focused policies.
Over the weekend, China announced a 50% reduction in stock-trading stamp duties, coupled with the approval of comprehensive guidelines for affordable housing. Meanwhile, the Chinese Politburo is gearing up for its routine monthly meeting. Speculation is on the rise that this gathering could potentially delve into further policy support for the ailing economy.
<h2 class="wp-block-heading">Market Reaction</h2>
Market reactions have been a mixed bag. While the latest measures seem to have tamed the sell-off witnessed at the start of August, they haven&#8217;t yet triggered a full-scale rally across assets exposed to China. In Hong Kong, the Hang Seng index, which is tracked by the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>) managed to post a 2% surge on Tuesday, tallying a 5% climb compared to the previous week, though it remains 9% lower for the month.
U.S.-listed Chinese stocks, including Alibaba Group Holdings (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>), Tencent Music Entertainment Group (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TME#NYSE">TME</a>), JD.com Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/JD#NASDAQ">JD</a>) and Baidu Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BIDU#NASDAQ">BIDU</a>), are all trading about 1.5% higher in premarket trading. The EV-maker NIO Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/NIO#NASDAQ">NIO</a>) declined over 6% in the premarket after <a href="https://www.benzinga.com/news/earnings/23/08/34085229/nio-stock-dips-after-q2-results-trail-estimates-ev-maker-eyes-q3-rebound-in-deliveries-and-sales">reporting disappointing earnings in Q2. </a>
The dollar-yuan (USD/CNY) exchange rate continues to hold steady around 7.29, close to the peak levels attained in mid-August. As for commodities intricately linked with China, such as copper and silver, their performance remained largely stagnant on Tuesday, both having retreated from the highs of July.
Investors are anxiously awaiting insights into China&#8217;s economic state through the upcoming release of the Purchasing Managers&#8217; Indices (PMIs) for manufacturing and services. Projections suggest a minor uptick in the manufacturing PMI, moving from 49.4 to 49.5, although it will remain in contraction. Meanwhile, the services PMI is anticipated to dip from 51.5 to 51.1, marking the lowest point since December 2022.
Read now: <a href="https://www.benzinga.com/news/23/08/34081925/economic-stability-in-us-china-relations-is-what-the-world-expects-from-us-says-gina-raimondo">Economic Stability In US-China Relations Is ‘What The World Expects From Us,' Says Gina Raimondo</a>
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Shutterstock

China Takes Drastic Measures To Shield Economy From Real Estate Storm

Guidance

Abercrombie & Fitch Exec Says Continuing To See Good Trends In APAC Out Of China And Hong Kong

The People&#8217;s Bank of China (PBoC) continues to send waves of <a href="https://www.benzinga.com/topic/china">uncertainty through the market. </a>
The central bank executed a 10-basis-point cut to its 1-year loan prime rate (LPR), setting it at an unprecedented low of 3.45%. Interestingly, the PBoC chose to leave the 5-year LPR—the reference rate for mortgages—unchanged at 4.2%, drawing skepticism over its commitment to invigorating the property sector.
The decision to trim short-term lending rates while keeping long-term rates unchanged has ignited a fiery debate, leaving investors on edge and the broader financial landscape shrouded in doubt.
According to Goldman Sachs analysts, including Maggie Wei, the PBoC&#8217;s move aims to defend banks&#8217; interest rate margins. &#8220;Confidence remains key to an economic recovery, and the disappointing cut to the loan prime rate would not help with building confidence,&#8221; she added. 
Citigroup and UBS Group AG have added their names to the expanding roster of investment banks revising down their forecasts for China&#8217;s economic expansion. Citigroup lowered its 2023 GDP growth projection from 5% to 4.7%, while UBS, taking a more cautious stance, adjusted its estimate to 4.2%, marking one of the more downbeat predictions.
<h2>China&#8217;s Declines Deepens On Rate Uncertaint</h2>
The Hong Kong&#8217;s Hang Seng Index fell by 1.82%, shedding nearly 330 points and slipping below the psychologically significant 18,000 mark for the first time since Nov. 28, 2022.
Last Friday, the Hang Seng, which is tracked by the iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>) had already officially entered a bear market after dropping by around 21% from its January peak. Financial and tech shares bore the heaviest losses, each diving over 2%. 
Also Read: <a href="https://www.benzinga.com/news/23/08/33957174/xi-jinpings-china-urges-brics-for-all-out-economic-war-against-g7-nations">Xi Jinping&#8217;s China Urges BRICS For All-Out Economic War Against G7 Nations</a>
Chart: Shares in Hong Kong Enters Bear Market
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="1024" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/21095046/EWH_2023-08-21_15-49-39_6f14d-1024x1024.png" alt="" class="wp-image-91542" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/21095046/EWH_2023-08-21_15-49-39_6f14d-1024x1024.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/21095046/EWH_2023-08-21_15-49-39_6f14d-300x300.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/21095046/EWH_2023-08-21_15-49-39_6f14d-150x150.png 150w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/21095046/EWH_2023-08-21_15-49-39_6f14d-768x768.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/21095046/EWH_2023-08-21_15-49-39_6f14d.png 1080w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
In mainland China, domestic equity benchmarks also suffered further declines. The Shanghai Composite index and the Shenzhen Component dropped by 1.2% and 1.3%, respectively. Both indices now languish at their lowest levels in a span of at least seven months, underscoring the prevailing market pessimism.
<h2>US-Traded Chinese Stocks Experience Pre-Market Dip</h2>
Notable Chinese ADRs traded in the US witnessed further market declines.
Alibaba Group Holdings Ltd (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>) fell 0.1%, JD.com, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/JD#NASDAQ">JD</a>) held steady, Tencent Music Entertainment Group (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TME#NYSE">TME</a>) dropped 3% and Baidu, Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BIDU#NASDAQ">BIDU</a>) slipped 1%. EV carmaker NIO Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NIO#NYSE">NIO</a>) rose 2.7%, while Li Group Inc. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/LI#NASDAQ">LI</a>) edged 0.5% higher. 
Now Read: <a href="https://www.benzinga.com/markets/equities/23/08/33958371/will-tesla-snap-6-day-losing-streak-today-whats-going-on-with-the-stock">Will Tesla Snap 6-Day Losing Streak Today? What&#8217;s Going On With The Stock</a>
Photo: Shutterstock

China's Rate Change Causes Market Panic; Big Dive In Hong Kong Stocks

Warnings from China&#8217;s state-owned property developers have sent ripples of concern throughout global markets, raising fears that the housing crisis is no longer confined to the private sector but is spreading to <a href="https://www.benzinga.com/23/08/33899796/should-investors-worry-about-china">government-backed companies as well.</a>
Amid China&#8217;s persistent housing slump, previously immune state-owned enterprise builders are now grappling with financial losses. 
An analysis of corporate filings by <a href="https://www.bloomberg.com/news/articles/2023-08-17/china-s-state-developers-warn-of-major-losses-as-crisis-spreads?sref=TBDibEcD">Bloomberg</a> reveals that 18 out of 38 such builders listed in Hong Kong and mainland China have reported preliminary losses in the six months leading up to June 30. This represents a significant increase from the 11 that had forewarned of full-year losses in the preceding year.
<h2 class="wp-block-heading">Domino Effect Starts To Propagate</h2>
In the private developers front, even established names like Country Garden Holdings Co. are feeling the heat as China&#8217;s home sales plummeted remarkably in the past month, culminating in heightened concerns of a looming default. 
Country Garden&#8217;s offshore dollar bond maturing in January 2024 is currently trading at below 10 cents to the dollar, as the property development company missed an interest payment earlier this month and entered a month-long grace period. 
The property crisis has now spread widely throughout China&#8217;s shadow banking sector. At the end of July, Zhongzhi Enterprise Group Co., an asset management company with over 1 trillion yuan ($137 billion), suspended payments to thousands of customers, drawing the notice of regulators and the media. Once-China&#8217;s largest real estate company, Evergrande sought bankruptcy protection from creditors in a U.S. court on Thursday, as part of the ongoing debt restructuring. 
Also Read: <a href="https://www.benzinga.com/markets/asia/23/08/33875989/chinas-real-estate-crisis-echoes-lehman-moment-country-garden-warns-of-major-uncertainties-as-bond-r">China&#8217;s Real Estate Crisis Echoes Lehman Moment; Country Garden Warns Of &#8216;Major Uncertainties&#8217; As Bond Redemption Looms</a>
<h2 class="wp-block-heading">Banks Cut Chinese Outlook</h2>
Major investment banks such as Nomura Holdings Inc., Morgan Stanley, and JPMorgan Chase &amp; Co. have all recently revised their growth estimates downward, casting a grim picture for the outlook of the Chinese economy.
Nomura has scaled back its growth forecast for China in 2023 to 4.6%, citing disappointing data from July and an ongoing &#8220;downward spiral&#8221; within the economy. Likewise, Morgan Stanley and JPMorgan Chase &amp; Co. have revised their predictions to 4.7% and 4.8%, respectively, illustrating the consensus on the challenges ahead.
<h2 class="wp-block-heading">Market Reactions: The Beginning of The End?</h2>
In response to these developments, the Shanghai Composite fell by another 1% on Friday, closing at 3,132, while the Shenzhen Component experienced a sharper drop of 1.75% to 10,459. 
The downturn hit the Hong Kong&#8217;s equities market, where stocks in the Hang Seng Index plummeted by 2.05%, resulting in a weekly decline of 5.9%—marking the third consecutive drop.
The iShares MSCI Hong Kong Index Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>) and the iShares MSCI China ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MCHI#NYSE">MCHI</a>) have both fallen by nearly 10% month to date. 
The largest U.S.-listed Chinese stocks, Alibaba Group Holdings Ltd. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BABA#NYSE">BABA</a>), is down 3.3% in the premarket trading on Friday, which would extend the weekly dip to 7%. 
Chart: Month-to-Date Performance of China-Related ETFs and Alibaba Stock
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="699" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/18083028/BABA_2023-08-18_14-28-45_43fc3-1024x699.png" alt="" class="wp-image-90239" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/18083028/BABA_2023-08-18_14-28-45_43fc3-1024x699.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/18083028/BABA_2023-08-18_14-28-45_43fc3-300x205.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/18083028/BABA_2023-08-18_14-28-45_43fc3-768x524.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/18083028/BABA_2023-08-18_14-28-45_43fc3-1536x1048.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/08/18083028/BABA_2023-08-18_14-28-45_43fc3.png 1583w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Now Read: <a href="https://www.benzinga.com/news/23/08/33900693/elon-musk-money-how-much-does-the-richest-person-on-the-planet-pay-employees-at-tesla">Elon Musk Money: How Much Does The Richest Person On The Planet Pay Employees At Tesla?</a>
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Shutterstock

China's State-Owned Developers In Crisis: Global Alarm Over Intensifying Housing Downturn

-Reuters Citing HK Enonomic Times

Tesla Said To Cut Prices On Some Model 3, Model Y Vehicles In Hong Kong

-Reuters Citing Sources
&nbsp;
<a href="https://www.reuters.com/markets/us-renews-audit-inspection-china-firms-bloomberg-news-2023-07-07/" title="https://www.reuters.com/markets/us-renews-audit-inspection-china-firms-bloomberg-news-2023-07-07/">https://www.reuters.com/markets/us-renews-audit-inspection-china-firms-bloomberg-news-2023-07-07/</a>

U.S. Inspectors Began New Round Of Routine Checks On Wall Street-Listed Chinese Companies' Audits In Hong Kong In Recent Weeks

Industry giant Morgan Stanley (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/MS#NYSE">MS</a>) is shaking up its model for income-focused investors, indicating a strategic move towards robust and resilient players. The multinational investment bank told investors Thursday that it added new positions and adjusted weights in its <a href="https://www.benzinga.com/yield-investments">dividend portfolio</a>.
What Happened: Morgan Stanley introduced two new names: mining conglomerate Rio Tinto plc ADR Common Stock (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/RIO#NYSE">RIO</a>) and medical technology business Smith &amp; Nephew plc (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SNN#NYSE">SNN</a>), while it rung the register on Amgen, Inc (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/AMGN#NASDAQ">AMGN</a>) and the iShares MSCI Hong Kong ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/EWH#NYSE">EWH</a>).
Strategist Kevin Demers explained Rio Tinto&#8217;s addition was driven by three factors: China&#8217;s likely announcement of a stimulus that could bolster commodity demand, Rio Tinto&#8217;s best-in-class balance sheet and underappreciated earnings power, and the company&#8217;s attractive valuation with a current spot free-cash-flow yield of 9%, <a href="https://seekingalpha.com/news/3983853-morgan-stanley-shakes-up-its-global-dividend-portfolio">according to</a> Seeking Alpha, which originally covered the portfolio changes. Read Also: <a href="https://www.benzinga.com/markets/asia/23/06/33050727/the-us-is-trying-to-weaken-chinas-semiconductor-industry-heres-what-china-is-doing-to-fight-back-in">The US Is Trying To Weaken China&#8217;s Semiconductor Industry: Here&#8217;s What China Is Doing To Fight Back In AI Race</a>
Smith &amp; Nephew's inclusion is also a result of three main factors: its potential for self-help, recovery of elective procedure volume in the medical sector, and its attractive valuation.
Morgan Stanley&#8217;s decision to drop EWH is strategic, opting for Rio Tinto, a company with significant exposure to China. The change could bring potential benefits from any easing by the Chinese government aimed to stimulate the economy, and consequently, a rebound in global economic growth.
Morgan Stanley removed Amgen, citing it could no longer provide a rating on the stock.
The investment bank is increasing weights in TotalEnergies SE (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TTE#NYSE">TTE</a>) and the WisdomTree Emerging Markets High Dividend Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DEM#NYSE">DEM</a>), while reducing its weight in Novartis AG (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/NVS#NYSE">NVS</a>).
The portfolio&#8217;s new composition suggests a focus on companies with strong balance sheets, resilience during challenging economic periods, and exposure to regions with potential for economic rebound and growth.
Read Next: <a href="https://www.benzinga.com/trading-ideas/long-ideas/23/06/33046519/how-to-earn-500-a-month-from-zim-integrated-shipping-stock">How To Earn $500 A Month From ZIM Integrated Shipping Stock</a>
Photo: Shutterstock