Global Market: China, Hong Kong stocks fall as CATL slump, consumer worries weigh

Weak consumer demand and slowing profit growth are testing investor confidence in Chinese equities.

China’s blue-chip CSI300 Index declined 0.7% by the midday break, while the Shanghai Composite Index fell 0.3%. Hong Kong’s Hang Seng Index was down 0.4%.

Shares of Contemporary Amperex Technology Co Ltd (CATL), the world’s leading electric vehicle battery maker, plunged 10% in both mainland China and Hong Kong trading after the company reported significantly slower profit growth in the third quarter. Intense competition and decelerating growth in China’s automobile sales weighed on its performance.

Investor concerns over consumer spending also pressured shares of toy manufacturer Pop Mart, which fell 4% by midday as the market anticipated potentially disappointing third-quarter earnings.

According to Reuters, market participants said investors were expressing concerns about weak domestic demand by taking bearish positions in consumer stocks ahead of the release of third-quarter earnings. Liquor producers and new energy companies led the market declines, while big data and cloud computing companies outperformed.

The weakness in Chinese equities came despite a broader recovery across Asian markets, highlighting concerns about the sustainability of domestic demand and the earnings outlook for companies exposed to Chinese consumers.

Investors also appear to be tempering expectations of fresh policy support. With exports helping sustain economic growth, market participants believe Chinese policymakers may have limited immediate incentive to introduce additional stimulus measures to boost markets and consumption.

Sophie Altermatt, an economist at Julius Baer, said in a note cited by Reuters that Beijing’s priorities remained focused on technological advancement, industrial upgrading and greater self-sufficiency rather than measures aimed at boosting short-term economic growth.

The divergence between technology-oriented sectors and consumer-facing businesses underscores the challenges facing China’s economic recovery. While exports and investment in advanced industries continue to provide support, concerns over household spending and corporate profitability remain a source of uncertainty for equity investors.

With third-quarter earnings releases underway, investors are likely to scrutinise corporate results for further evidence of the strength of domestic demand and the extent to which competitive pressures are affecting profit growth across key sectors.