Hong Kong's Hang Seng Index, a key benchmark for the region's stock market, continues to grapple with a lackluster performance, hovering near an 11-month low. The index has faced significant headwinds in recent months, primarily due to concerns about the Chinese economy and its impact on global financial markets. This recent downturn was exacerbated by an unexpected drop in manufacturing activity, which has raised doubts about the robustness of China's economic recovery.
On the day in question, the Hang Seng Index exhibited limited movement, with little change in the numbers, recording 17,199.12 before trading paused at noon local time. However, over the past three months, it had experienced a roughly 15% decline. Furthermore, the Tech Index, which closely tracks the performance of technology-related stocks, lost 0.3%. In contrast, the Shanghai Composite Index managed to buck the trend by posting a 0.2% increase.
The slump in the Hang Seng Index has not spared Chinese tech giants, with some notable companies experiencing a downturn. Alibaba Group, a major player in the e-commerce and tech industry, saw its stock drop by 0.6% to HK$79.55, while JD.com, another e-commerce platform operator and Alibaba's competitor, weakened by 1.7%, trading at HK$98.10. Meituan, a well-known food delivery platform, witnessed a 1.4% decrease, trading at HK$109.10. Macau casino operator Sands China and travel agency Trip.com also saw declines, falling by 1% and 1.6% to HK$20.80 and HK$264.40, respectively.
The downturn also affected BYD, an electric vehicle (EV) maker. Its stock price slipped by 1.9% to HK$233, extending a three-month slump. This decline followed news that Warren Buffett's Berkshire Hathaway had further reduced its stake in BYD's Hong Kong-listed shares. Berkshire Hathaway's stake was trimmed to 7.98% on October 25, down from the previous 8.05%.
The overall market apprehension was further fueled by the release of the Caixin/S&P Global PMI manufacturing index, which fell to 49.5 in October, down from September's 50.6. This figure came in below consensus estimates of 50.8, indicating a contraction in manufacturing activity. A similar report from the Chinese statistics bureau also revealed an unexpected contraction in manufacturing activity, contrary to the predictions of an expansion.
The Hang Seng Index's 14% decline this year positions it as the poorest performer among major global stock indices in 2023, according to data from Bloomberg. This persistent downward trend can be attributed to a combination of economic concerns and escalating geopolitical risks, particularly in the Middle East.
China, despite these economic headwinds, remains steadfast in its efforts to address systemic financial risks in its financial system. It has refrained from providing significant stimulus measures to jumpstart the economy, particularly in the face of a property market slowdown. During a recent financial work conference, President Xi Jinping reaffirmed the government's commitment to preventing and resolving financial risks, emphasizing that it remains an "eternal theme."
Investors have also maintained a cautious stance, awaiting the outcome of the Federal Reserve rate-setting meeting. It is widely expected that the key rate will remain unchanged, with rates traders pricing in a 98% chance of a pause. Meanwhile, there have been indications of easing geopolitical tensions between China and the United States, with President Xi and President Joe Biden set to meet in San Francisco for "constructive" talks later in the month, according to the White House.
Despite the challenges faced by the Hang Seng Index, other major Asian indices have managed to achieve gains. Japan's Nikkei 225 surged by 2.1%, South Korea's Kospi saw a 0.9% increase, and Australia's S&P/ASX 200 posted a gain of 0.7%. This divergence in performance reflects the complex and multifaceted nature of the global economic landscape, where various factors can influence the trajectory of financial markets.
By fLEXI tEAM