China, Hong Kong stocks decline amid caution ahead of US election
Updates at midday
SHANGHAI, Oct 24 (Reuters) -Mainland China and Hong Kong stocks edged lower on Thursday, as investors grew cautious and weighed the potential impact from the upcoming U.S. presidential election.
The growing bets of a possible second Donald Trump presidency and higher trade tariff threats have dampened market sentiment, investors and analysts said.
"In the betting markets, Trump-over-Harris spread has widened sharply in favour of Trump," said Christopher Wong, FX strategist at OCBC Bank.
"And that brings back worries of tariffs, inflation and fiscal concerns... A Trump outcome may see a play-up of U.S.-China trade tensions and should inject some uncertainty to markets."
At the midday break, the Shanghai Composite index .SSEC was down 0.5% at 3,286.17 points, while the blue-chip CSI300 index .CSI300 was down 0.8%.
The financials sub-index .CSI300FS fell 0.39%, the consumer staples sector .CSI000912 lost 1.17%, the real estate index .CSI000952 dropped 1.14% and the healthcare sub-index .CSI300HC shed 0.78%.
In Hong Kong, Chinese H-shares, the Hang Seng China Enterprises Index .HSCE, fell 1.24% to 7,385.8 points, while the Hang Seng Index .HSI was down 0.99% at 20,555.04.
Tech stocks were among the biggest losers in Hong Kong, with the Hang Seng Tech index .HSTECH plunging 1.78% in morning deals.
The U.S.-China tech war is all but certain to heat up no matter whether Republican Donald Trump or Vice President Kamala Harris wins the Nov. 5 election, with the Democrat likely to come out with targeted new rules and Trump a blunter approach.
"With the U.S. election less than two weeks away, portfolio managers need to be wary of potential market volatility driven by the binary outcome of either a Harris victory (status quo) or Trump victory (near-term dollar strength)," said Eugene Hsiao, head of China equity strategy at Macquarie Capital.
Meanwhile, the possible meeting of the Standing Committee of the National People's Congress (NPC) is on the radar. While the date of the meeting hasn't been announced, markets are expecting more details on near-term fiscal stimulus measures.
"We recommend investors to remain patient before sizing up China exposure in light of a still evolving policy landscape as the market has yet to settle into a new equity risk premium under the policy put mandate," Hsiao said.
Beijing earlier this month pledged to "significantly increase" debt to revive its sputtering economy, but left investors guessing on the overall size of the package.
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Reporting by Shanghai Newsroom; Editing by Sumana Nandy
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