China, HK Stocks Fall on Property Woes, Slow Services Growth

Stocks in China and Hong Kong fell on Wednesday on news of slowing services growth and concern that the country’s property slump could drag on for a fifth year.

Hong Kong’s Hang Seng Index sank by 1.3%, while the Shanghai Composite and China’s blue-chip CSI300 Index closed down 0.5%.

In Japan, the Nikkei share average rose by 0.7%, as tech stocks tracked overnight gains on Wall Street on the growing prospect of a US interest rate cut this month. But the broader Topix fell by 0.37%.

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The mood in Hong Kong is grim, of course, with news that 156 people were killed in the worst fire in decades. And about 30 more people are still missing.

Some 15 people have been arrested on suspicion of manslaughter in the police probe into the cause of the fire. Hong Kong’s anti-corruption body has also launched an investigation, and the city’s leader on Tuesday promised an independent inquiry led by a judge into the tragedy.

Services growth dips, Vanke on rating watch

The main business news on Wednesday was the release of a private survey that showed China’s services activity expanded at its slowest pace in five months in November.

Reuters also reported that China is likely to stick to its current annual growth target of around 5% next year, according to government advisers and analysts said. They said such a goal would require authorities to keep fiscal and monetary spigots open as they seek to snap a deflationary spell.

The grim services report dampened risk appetite already curbed by financial woes at Chinese property major Vanke.

“In 2026, we expect export growth to moderate while the property sector, which peaked in mid-2021, may extend its slide for another year, with little hope for a turning point in 2026,” Lu Ting, chief China economist at Nomura, said in a report.

Property shares continued to sink after Fitch Ratings on Tuesday placed Vanke, which has sought to delay payment on an onshore bond due this month, on “Rating Watch Negative”, and downgraded its subsidiary’s notes.

Vanke’s Shenzhen-listed shares lost 2.7% to the lowest level since late 2006, while its Hong Kong-traded stock dropped 3%.

China’s CSI300 Real Estate Index fell 2.1%, while Hong Kong’s Hang Seng Mainland Property Index dropped by 1.5%.

Metal producers and materials makers climbed after local media reports that some key material suppliers to lithium battery makers have raised prices, thanks to booming demand for energy storage, and China’s campaign against excessive competition and price wars.

“There’s not enough money flowing into the market,” Topsperity Securities said in a report. Investors are awaiting policy stimulus and “inadequate liquidity limits the market upside.”

More bets on a BoJ rate hike

In Japan, bank stocks lost ground after a sharp rally driven by increasing bets of a Bank of Japan rate hike as soon as this month.

Chip-related shares jumped, with Advantest and Tokyo Electron rising 4.5% and 4%, respectively. Renesas Electronics jumped 6.9%. Technology investor SoftBank Group rose 3.8%.

US stocks closed higher on Tuesday to record their sixth gain in seven sessions, buoyed by gains in technology shares as expectations the Federal Reserve will cut interest rates next week remain elevated.

Shares of Japan’s biggest banks fell, with Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group slipping 2% each.

Bank shares had rallied earlier this week after BOJ Governor Kazuo Ueda gave the clearest hint so far on a rate hike, saying the central bank would consider the “pros and cons” of rising rates at its December 18-19 meeting.

Auto shares also weighed on the Topix amid concerns that recent gains in the yen would cut into profits. Toyota Motor and Honda Motor fell 1% and 0.6%, respectively, while Nissan Motor eased 0.8%.

Asia shares were on steadier, helped by the rebound on Wall Street as a brief selloff in global bond markets and cryptocurrencies abated. Bitcoin reclaimed the $90,000 level.

MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3%.

Hassett ‘frontrunner to be Fed chair’

December has historically been a good month for stocks. Meanwhile, there was considerable interest in speculation on who could head the US Federal Reserve next.

Investors have also been pricing in a more dovish Fed outlook, according to Reuters, because of reports that White House economic adviser Kevin Hassett is the frontrunner to become the next chair, and that he is likely to deliver further rate cuts once he succeeds Jerome Powell.

US President Donald Trump said on Tuesday he would announce his Fed chief nominee early next year, and that he has narrowed the list to one person.

That kept the dollar on the back foot, leaving the euro 0.06% firmer at $1.1632. Sterling also rose 0.06% to $1.32235, while the dollar fell 0.07% against the yen to 155.77.

“Hassett is dovish on monetary policy and closely aligned with President Trump. His appointment can therefore dent the FOMC’s perceived independence, a negative for the USD,” Kristina Clifton, senior currency strategist at Commonwealth Bank of Australia, said.

The Australian dollar fell after data showed the Australian economy slowed unexpectedly in the September quarter, missing forecasts. It was last flat at $0.6566.

In commodities, oil prices were nursing losses after falling in the previous session, as markets weighed faltering Russia-Ukraine peace hopes against fears of oversupply.

Brent crude futures were up 0.06% to $62.49 a barrel, while US crude rose 0.07% to $58.69 per barrel.

Spot gold was up 0.2% at $4,216.13 an ounce.