China markets face lower open as weak Golden Week spending deepens gloom

Chinese stock markets face a difficult return to trading on Thursday after the week-long National Day holiday, weighed down by bleak consumer spending figures and losses across Chinese shares listed in Hong Kong.

Mainland exchanges have been closed since 1 October for Golden Week. In that time, an index tracking major Chinese companies in Hong Kong slid 1.7 per cent, while the benchmark Hang Seng Index dropped 2 per cent since 30 September. Those declines leave the onshore CSI 300 Index exposed to fresh selling after it broke through a key technical support line of 4,418 late last month, matching a low seen in March.

Early holiday indicators suggest households remain reluctant to open their wallets. Travel was subdued, per-person expenditure softened, and city entertainment struggled, marked by a steep decline in cinema box-office receipts, according to analysis by Citigroup.

That spending slump follows a series of targeted economic measures rolled out in late September, including mortgage subsidies and expanded bank lending for selected industries. Those steps did little to convince investors that Beijing is prepared to deliver the broader stimulus required to counter entrenched domestic deflation and stagnant consumer sentiment.

"HSI is down for the period and seems like no positive news on the consumption front, so probably a lower open," said Leonid Mironov, a portfolio manager at Gavekal Capital. He noted that caution is likely to dominate until the Chinese Communist Party convenes its fifth plenum from 26 to 29 October.

Expectations for that gathering are already building. In an article published on 1 October, Finance Minister Lan Foan said the government is considering additional fiscal measures to secure its economic growth targets for 2026.

"Beijing’s additional policy tweaks are by no means certain, but they are logical choices for the country that needs to at least lean against the persistent softness in domestic demand," said Homin Lee, senior macro strategist at Lombard Odier Singapore.

Technicians warn that failure to stage a quick turnaround could trigger accelerated selling across mainland boards. Matt Maley, chief market strategist at Miller Tabak, warned that unless the CSI 300 rebounds rapidly from its breakdown below 4,418, "any further weakness will signal a very important change in trend."

Any upside upon reopening may remain confined to specialist sectors. Hardware and semiconductor shares could draw support from a recent licensing deal between Qualcomm and Huawei covering Huawei's novel LogicFolding chipmaking process. Mironov noted that the artificial intelligence chip space holds "a lot more reasons to be bullish than the broader market."

Outside equities, other domestic assets appear steadier. The offshore yuan held largely flat against the US dollar across the holiday break, even as a broader dollar index gained around 0.3 per cent. Analysts also expect Chinese government bonds to remain insulated from recent volatility in global debt markets, sheltered by weak domestic growth and ongoing deflationary pressures.