Equity markets in Hong Kong and the mainland are on a rollercoaster ride while fiscal and central bank authorities are caught between a rock and a hard place.
Perfect timing in business, economies, and markets is almost impossible. Take the Federal Reserve’s recent actions as a case in point.
Two months ago, analysts and economists thought the US central bank had missed a huge trick, as a piece from «Straight Arrow News» in early August indicates.
According to many, they didn’t act quickly to take a big enough swipe off interest rates when they could, at a time when many of them believed the economy was directly headed for a hard landing.
No Space Left
Fast forward to early October, and that kind of Weltanschauung, if it can be called that deep, has been turned upside down and inside out.
One unexpectedly high payroll read (collated Google search) last week, and the same voices are now chiming, almost unisono, that the board of governors only has space to make at most one 50 basis point cut or another two 25 basis pointers by the end of the year.
The Opposite Approach
If you are in an economic or fiscal function in government, whatever you do, and wherever you are, you always seem to be caught between a rock and a hard place.
For years, China seemed to manage that dilemma by adopting practically the opposite approach – saying as little as possible and letting GDP targets, actual growth numbers, and a government statement here or there guide the way.
Increasingly Misplaced
But then came a difficult post-pandemic recovery, the years-long real estate crisis, and what seemed to be an increasingly unbalanced economy.
Their approach looked increasingly misplaced in the face of snowballing pessimism, leading to the equity markets in China and Hong Kong falling by more than half at the outset of the year, as finews.asia reported then.
Sharply Higher
Suddenly, however, the tune changed, and officials seemed to take a cue from the playbooks in other markets, including the US.
They announced higher-than-anticipated interest rate cuts at the end of September, prompting equities to veritably boom, driving key equity indexes almost 30 percent higher at one point.
Big Headache
The hangover came quickly. On Monday, the Hang Seng index suffered its biggest single-day drop since the global financial crisis.
The apparent reason? The mainland’s economic planning agency indicated a number of measures without showing anybody clear amounts of money.
Meetings and Conferences
The blowback seems to have prompted a flurry of additional announcements and press conferences by central bank and finance ministry officials.
As the «South China Morning Post» indicated (registration required) on Wednesday, the People’s Bank of China (PBoC) and the finance ministry held a first joint working group meeting to strengthen the coordination of monetary and fiscal policy.
On the Treadmill
The newspaper also indicated that the Ministry of Finance (MoF) would hold a press conference this Saturday to discuss fiscal policy, when the stock markets are closed, with many commentators expecting very significant measures to be announced.
Whatever else you say about current developments, it seems that China's central bankers and fiscal authorities are now on the same treadmill that everyone else is on.
