The $HSI(HSI)$ is up 3.8% this week, with the August futures closing at 25,903 yesterday – its highest level since 2 June 2026
💪The market has been notably resilient compared to the Asian markets of Japan and Korea – whose selldown this week has led the MSCI Asia Pacific Index to enter into correction territory following a 11% selldown from its 22 June peak
📜One of the key themes for the HSI/Chinese stocks this week was yesterday’s statement from the Politburo to “enhance the resilience and confidence of the capital market”
✍Macquarie Sales and Trading’s (S&T) released a note yesterday to provide their take on the Politburo statement and what they believe could trigger the Chinese government to do more
Read on for important disclaimers
The below communication has been prepared by Sales and Trading (S&T) Personnel at Macquarie and is not a product of the Macquarie Research Department. For important disclosures relating to this communication, please see: www.macquarie.com/salesandtradingdisclaimer
After growth slowed to 4.3% in 2Q, policymakers decided to do a bit more to bring growth back this year's "4.5-5%" target. But they show no intention to do a lot more.
Policy: Incrementally supportive
In April, the key message was "better than expected", following 1Q GDP growth of 5.0% year-on-year (yoy). On the back of that, broad fiscal spending fell by 8% yoy in 2Q, after rising 3% in 1Q (Fig 1-2).
With 2Q GDP growth slowing sharply to 4.3% yoy, yesterday's Politburo meeting dropped "better than expected" and highlighted "the difficulties and challenges" facing the economy.Given the new assessment, today's meeting reinstated the phrase “counter-cyclical adjustment,” which was omitted in April. Even so, the policy shift remains incremental, as 1H26 GDP growth of 4.7% is still broadly in line with the annual target.
Fiscal to turn more supportive
Fiscal tapering in 2Q turned into a primary drag on growth. Yesterday, policymakers vowed to “make full use of existing policies,” and, if that proves insufficient, said they will “study and roll out additional measures in a timely manner.”
In other words, policymakers decided to do more, but they don't feel much urgency for now.
The priority remains the “six networks,” which were highlighted in April and reiterated yesterday: water networks, new power grids, computing-power networks, next-generation communications networks, urban underground pipeline networks, and logistics networks.
Yesterday’s meeting called for "accelerating fiscal spending and the use of bond proceeds". S&T estimates roughly RMB7.5 trillion of government bond quota remains to be issued in 2H, which is RMB1.3 trillion more than in 2H25 (Fig 3). Meanwhile, the government could accelerate the deployment of RMB800 billion in policy-based financial instruments to support infrastructure investment.
Beyond fiscal policy, not much new from yesterday's meeting:
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It didn't mention policy rate or RRR cut.
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It didn't mention anything on housing policy either. Compared with April, today's meeting dropped reference to the urban renovation program. It's clear that policymakers don't feel pressed to engineer a near term bottom in the housing market.
Given the importance of tech, today's meeting also mentioned “AI+” initiative (integrating AI into the real economy) and "AI Governance." But these are more about long-term industrial and regulatory strategy than short-term macro policies.
What would trigger them to do more?
China is currently operating a two speed economy: AI related exports and manufacturing form the strong track, while consumption and housing remain the weak track. At the same time, policymakers follow the "Just Enough" rule, meaning that they will do just enough to achieve the growth target.This implies that, if the strong track remains strong, the weak track will remain weak. If the strong track gets weaker, policymakers will do more to make the weak track stronger.The recent AI selloff doesn't bode well for China's export outlook in the months ahead (Fig 4). Beijing will do more if exports slow meaningfully.
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Warrants to trade the broad HSI and Chinese shares listed in Hong Kong
The Hong Kong benchmark Hang Seng Index (HSI) tends to react to news from China, given that many of its index constituents are Chinese companies.
Bullish investors who believe that the HSI / specific Chinese shares may head yet higher in the short term can consider using call warrants which move in line with the underlyings they track.
On the other hand, bearish investors who believe that market may start heading lower from here in the short-term can consider put warrants.
Warrants move in greater percentages than the price movements in the underlying assets that they track, while requiring a lower capital outlay compared to investing directly in the underlying asset, and come without the risk of margin calls.
List of trending HSI and Chinese stock warrants
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