China stocks drop as stimulus optimism fades; Hong Kong edged higher

HONG KONG, Dec 20 – China’s blue-chip stocks hit a near five-year low on Wednesday, as investors are gradually losing hopes for stimulus surprises and not willing to buy the dip, while Hong Kong shares rose tracking overnight Wall Street gains.

** The blue-chip CSI 300 Index dropped 1.1%, dipping to its lowest closing level since February 2019, while the Shanghai Composite Index declined 1.0%.

** Hong Kong’s Hang Seng Index rose 0.7%, and the Hang Seng China Enterprises Index climbed 0.4%.

** China kept benchmark lending rates unchanged at the monthly fixing, matching market expectations, after the central bank kept its medium-term policy rate steady last week.

** Analysts said investors sentiment is gloomy after last week’s Central Economic Work Conference fell short of offering great stimulus to bolster the faltering recovery.

** A BofA Asia fund manager survey released on Wednesday showed more than 60% of investors would rather stick to a wait-and-watch approach or look for opportunities elsewhere than be exposed to China equities.

** “Investor interest towards risk assets in China is shockingly low,” the survey said.

** Yet J.P Morgan analysts noted that investors were likely neglecting the lagged impacts of the country’s fiscal stimulus due to be more visible in early 2024.

** “The current low positioning sets the base of a rebound into early 2024,” they said.

** Meanwhile, the United States has added 13 companies in China to a list of entities receiving U.S. exports that officials have been unable to inspect, according to a government notice posted on Tuesday.

** Sector wise, media, artificial intelligence-related firms, and brokers fell 3.1%, 3% and 2.7%, respectively, to lead the decline.

** In Hong Kong, Alibaba Group 9988.HK gained 2.7% after the firm appointed a new CEO to head its domestic e-commerce arm.

** Hang Seng Tech Index closed 0.5% higher.

(Reporting by Summer Zhen; Editing by Rashmi Aich)