[Click eStock] "Greater China Markets Start Lower on Trump Risk"

Korea Investment & Securities analyzed on the 6th that last week, the Chinese and Hong Kong stock markets started lower due to Trump risk and concerns about economic sluggishness.

Investor sentiment was dampened by the December Manufacturing Purchasing Managers' Index (PMI) falling short of consensus and rumors of an epidemic emergency. Ahead of Trump's inauguration, volatility increased, causing the CSI300 index to fall by 5.2% and the Hong Kong H index by 2%. The Development and Reform Commission announced strengthened policies such as expanding the scope of consumer goods replacement to digital products and extending the period, leading consumer-related stocks to relatively outperform. On the other hand, tech-related stocks such as AI and semiconductors, which had recently seen large gains, and the banking sector underperformed. The Greater China stock market is expected to continue a box range trend amid high volatility in January.

The official manufacturing PMI for December recorded 50.1, exceeding the baseline for three consecutive months. However, it declined compared to the previous month due to seasonal effects and fell short of consensus. The Caixin manufacturing PMI also fell short of consensus at 50.5 but still remained above the baseline. Production continued to outpace demand in December, and the fact that demand recovery was faster than production was considered encouraging. Although the December manufacturing PMI showed an incomplete recovery, the Q4 manufacturing PMI generally exceeded seasonal norms due to the effects of economic stimulus measures. The economic growth rate for Q4 this year is expected to likely exceed 5%.

China will announce economic real indicators for January and February in mid-March due to the Lunar New Year holiday. With no macro indicators available to monitor economic recovery until the March Two Sessions, events that can gauge China’s policy direction and economic situation are scheduled. Attention can be paid to press briefing meetings held by various ministries before the Two Sessions. Before the 2024 Two Sessions, 12 ministries held press briefing meetings, mentioning measures such as reserve requirement ratio cuts, early issuance of special local government bonds, large-scale equipment upgrades and consumer goods replacement policies, and promotion of low-carbon economy industry development. Interest is also needed in the local Two Sessions held in January. Key points to watch include each region’s 2025 economic growth target, new employment population, CPI, fixed asset investment and retail sales targets, and major industrial policies including the real estate market. Since 2025 is the final year of the 14th Five-Year Plan, the economic growth target is likely to remain around 5%.