Hong Kong’s Hang Seng hits five-year low

AFP
AFP

Summary

  • Some indexes in mainland China close at levels last registered in 2020

Hong Kong’s Hang Seng Index dropped 3.9% Monday to close at its lowest since July 2016, as an international selloff fueled by the war in Ukraine put fresh pressure on a market already suffering from Beijing’s corporate crackdowns and tough local pandemic policies.

Some key stock indexes in mainland China also fell to their lowest levels in more than a year, after a weekend meeting of China’s legislature failed to ease investor concerns about the regulatory outlook for the country’s beleaguered technology and property sectors.

The Hang Seng is a key gauge of Hong Kong’s broader market, which is one of the world’s largest outside the U.S., with listed shares in total worth some $5.2 trillion as of February.

Compilers have overhauled the Hang Seng to make it broader and less reliant on finance, but that didn’t save the index from turning in a poor performance last year, given China’s curbs on sectors such as technology, gambling, property, and after-school education.

After recouping some losses early this year, the Hang Seng fell back into negative territory in late February as Russia’s invasion of Ukraine rattled investors and the city struggled to battle its biggest Covid-19 wave. Monday’s fall,to 21057.63, took the index’s year-to-date losses to 10% and means it is about 2% lower now than it was a decade ago, FactSet data shows.

By index points, the biggest contributors to Monday’s decline were the food-delivery giant Meituan, which fell 11% to hit its lowest since May 2020, and HSBC Holdings PLC, which fell 7.1%. Banks such as HSBC can typically earn higher margins on loans when benchmark borrowing costs are higher, and global bond yields have pulled back recently.

While Chinese leaders set a higher-than-expected 5.5% GDP growth target for this year at the weekend meetings, signaling more aggressive stimulus in the coming months, the gathering shed little light on when regulatory pressures would abate for internet companies and others.

“We’re yet to hear from authorities about regulatory reforms to pause, but we’re actively looking for the signs," said Jack Siu, Credit Suisse’s chief investment officer for Greater China.

Likewise, there was little sign of a letup on China’s economically important property sector, where many developers that aren’t state-backed are struggling with a slowdown in sales and a drying-up of funding markets.

“Most people in the market were looking for a blanket relaxation on the property curbs, and we aren’t getting it," said Hao Hong, head of research and chief strategist at Bocom International, adding that this had weighed on onshore-listed stocks.

In mainland China, the benchmark CSI 300 Index of blue-chip stocks Monday fell 3.2% to its lowest close since July 2020, while the ChiNext Price Index, which tracks a high-tech board in Shenzhen, sank to its lowest since November 2020. The Shanghai Composite dropped 2.2%.

The Russia-Ukraine war could affect China more than other emerging markets, because China is a major trading partner of Europe and has also cultivated a closer relationship with Russia, Morgan Stanley strategists led by Laura Wang wrote in a report last week.

In Hong Kong, the city’s pursuit of a strict Covid-19 containment policy has also prompted some residents to depart and put downward pressure on the economy.

The city’s policies aren’t clear enough for investors to accurately forecast Hong Kong’s economic growth in the near term, said David Chao, global market strategist for Asia Pacific ex-Japan at Invesco. He said the Hong Kong market would only start to recover when the pandemic strategy becomes clearer, likely in the second half of the year.

This story has been published from a wire agency feed without modifications to the text

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