Hong Kong Stocks Set for Fourth Monthly Drop Amid China's Economic Concerns

Hong Kong stocks are on track for a fourth consecutive month of losses, driven by concerns over China's economic slowdown as manufacturing contracted more than anticipated. The Hang Seng Index, initially falling by 0.8%, rebounded slightly to a 0.2% gain at the local noon trading break. The Tech Index declined by 0.6%, while the Shanghai Composite Index saw a 0.2% increase.

Tencent witnessed a 2% rally to HK$323.20, with Longfor Group and China Resources Land also gaining 2.2% and 1.1%, respectively. China Mobile and China Unicom advanced by 1.5% and 2%, respectively. However, AIA Group led the losers with a 2.6% slide to HK$67.40. Electric vehicle maker BYD dropped 2.4%, and Alibaba Group slipped 0.8%.

The Hang Seng Index has experienced a 0.5% decline in November, contributing to a cumulative 15% slide over the previous three months, resulting in a total sell-off of HK$579 billion (US$74 billion). This marks the first time the index has fallen for four consecutive months since July to October 2022.

China's official Purchasing Managers' Index (PMI) manufacturing index declined to 49.4 from October's 49.5, contrary to market expectations of an increase to 49.8. A reading below 50 indicates a contraction in activity. The economic outlook is deemed risky, and confidence is lacking in the short term, according to Caroline Yu Maurer, Head of China and Hong Kong equities at HSBC Asset Management.

Despite the current challenges, some money managers, including Fidelity and Templeton, anticipate a turnaround in Chinese asset prices as the government increases support for the struggling property market, and stock valuations become more attractive. Zheng Xiaoxia, an analyst at Hua An Securities, noted that the economic recovery is ongoing, albeit at a weak pace, with efforts to defuse risks from the property market and local government debts.

Notable losers in November include Meituan, plunging 17% due to concerns about a demand slowdown, BYD down 13% on price-war worries, and Alibaba losing 9.9% following the abandonment of a key part of its business reorganization.

China's shrinking exports, weakening factory activity, and worsening deflation have eroded investor confidence in the country's recovery momentum. Foreign investors have sold a record 182 billion yuan (US$25.7 billion) of onshore stocks since the end of July, according to Stock Connect data.

In Beijing, Machinery Technology Development saw a remarkable 200% surge on its first day of trading. Meanwhile, Asian markets showed mixed performance on Thursday, with Japan's Nikkei 225 and South Korea's Kospi remaining largely unchanged, while Australia's S&P/ASX 200 rose by 0.6%.

By fLEXI tEAM