Stocks in China and Hong Kong closed lower on Wednesday amid fresh signs of economic slowdown and as analysts cast doubt over the latest government effort to boost consumption. The Shanghai Composite index settled 0.7 percent lower at 2,575.58 points. The blue-chip CSI300 index fell 0.8 percent, with its financial sector sub-index losing 0.5 percent, healthcare shares 0.7 percent, and information technology stocks 1.8 percent.
The smaller Shenzhen index ended down 1.3 percent and the start-up board ChiNext Composite index was weaker by 1 percent. At least 23 Chinese provinces have cut their annual growth targets for 2019, up from just 17 the year before. Concerns over macro headwinds led Daiwa to downgrade liquor companies in China, sending the shares of the sector lower, and dragging the CSI consumer staples index down 1.5 percent.
Shares of Shenzhen-listed COFCO Biochemical Anhui Co Ltd and Hong Kong-listed China Life Insurance Co Ltd also dropped on weak earnings forecasts.
To spur growth, China on Tuesday unveiled a flurry of measures aimed at boosting sales of items ranging from cars and appliances to information services. Unlike the last consumption boost in home appliances, which was led mainly by the central government, "the source of subsidy for this round of policy is still unknown," and the policy announcement appears to suggest that local governments will take the lead this time, SWS Research said in a Wednesday note. Auto consumption's recovery will largely depend on that of the wider economy, Yang Ouwen, an analyst at Chuancai Securities, wrote in a memo on Tuesday. "If the macroeconomy does not reach expectations (of recovering in the second half), there is a risk that car sales will come down again." Chinese Vice Premier Liu He and central bank Governor Yi Gang are in Washington for a new round of trade negotiations with the United States, which will include a meeting with President Donald Trump.
But as negotiations resume, domestic worries will occupy the minds of local investors in the near future, analysts at Guotai Junan Securities wrote in a memo on Wednesday. "The core factors influencing risk appetite are falling (corporate) profits and blockages in credit transmission," they said.
Chinese markets will be closed for Lunar New Year holidays between February 4 and February 10. Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.3 percent, while Japan's Nikkei index closed down 0.5 percent. The largest percentage losers in the Shanghai index were Xining Special Steel Co Ltd, Hunan Tyen Machinery Co Ltd and Beijing Bashi Media Co Ltd, all down by 10.1 percent.
Shanghai stocks have risen 3.3 percent this month. About 12.05 billion shares were traded on the Shanghai exchange. The volume in the previous session was 15.56 billion. The Shanghai stock index is above its 50-day moving average and below its 200-day moving average.
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