China's stock markets were largely subdued on Friday, with the Shanghai benchmark little changed and Hong Kong equities edging higher, as investors weighed expectations of additional fiscal support against concerns over weak domestic demand and the recent global bond selloff, Reuters reported.
At midday, the Shanghai Composite was flat at 3,903.81 points, while the blue-chip CSI300 index gained 0.52%. The start-up-focused ChiNext Composite rose 1.2%, while Shanghai's technology-heavy STAR50 index edged up 0.1%.
The muted market reaction came after China's Vice Finance Minister Liao Min said on Friday that the government would implement additional fiscal policy measures in response to economic developments. The comments came as a series of July economic indicators pointed to persistent weakness in domestic demand.
Industrial production, retail sales and credit data released for July showed signs that China's economic recovery continues to face challenges, raising expectations that Beijing may need to provide further policy support.
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According to Reuters, investors appeared reluctant to take on additional risk despite the government's latest signals on fiscal policy, with markets looking for clearer evidence that measures aimed at supporting growth are translating into stronger domestic consumption.
Non-ferrous metal stocks were among the strongest performers in mainland China, with the relevant sub-index rising 1.9%. Higher gold prices, supported by a weaker U.S. dollar and a U.S. Treasury bond buyback move, helped lift sentiment toward metal-related shares.
In Hong Kong, the Hang Seng Index rose 0.7%, while the city's technology stocks advanced 0.5%.
Investors were also turning their attention toward global markets for the next major catalyst. Reuters reported that market participants are expected to closely watch Federal Reserve Chairman Kevin Warsh's speech at the central bank's Jackson Hole symposium next week for signals on the U.S. monetary policy outlook and how policymakers intend to address still-elevated inflation.
The U.S. Treasury's surprise bond buyback had failed to fully ease concerns surrounding inflation and rising government debt, keeping pressure on global bond markets and adding another layer of uncertainty for equity investors.
For Chinese stocks, the combination of weak domestic demand, elevated policy expectations and uncertain global financial conditions is likely to keep investors focused on whether Beijing follows through with additional fiscal measures and whether those steps can provide a meaningful boost to economic activity.
