A gauge of Chinese stocks in Hong Kong was poised to enter a correction, as a selloff spurred by geopolitical tensions and doubts over the nation’s economic recovery extended.
(Bloomberg) — A gauge of Chinese stocks in Hong Kong was poised to enter a correction, as a selloff spurred by geopolitical tensions and doubts over the nation’s economic recovery extended.
The Hang Seng China Enterprises Index slid as much as 1.9% in Hong Kong on Wednesday, taking its losses from a Jan. 27 peak to more than 10%. It jumped around 50% in the three months to that high.
The sharp surge in Chinese stocks hit a stumbling block in February as weakness among manufacturers and tepid sales of cars and homes dented the optimism sparked by the nation’s faster-than-expected reopening. Global fund managers are pinning their hopes on potential pro-growth policies from the National People’s Congress in March to resuscitate the rally.
Read: Fidelity, abrdn See China Congress Giving Stocks Their Mojo Back
“We are seeing capital flowing out of Hong Kong, due to capital outflow concerns and lack of positive catalysts in China’s stock market,” said Banny Lam, head of research at Ceb International Inv Corp Ltd. “It will take another two weeks before we learn more information about the Chinese economy’s direction via the key two sessions. In this period of policy vacuum, people would choose to take profit first.”
A rise in Sino-American tensions over a suspected spy balloon also soured sentiment in recent days. The HSCEI measure rallied since the start of November as China’s dismantling of its Covid Zero policy led to a surge in consumption, with catering, tourism and other in-person businesses recording big increases in revenue over the Lunar New Year holiday.
“The good news from China reopening has been quickly discounted,” said Steven Leung, executive director at UOB Kay Hian. “We are all waiting for further policies from the NPC,” Leung said, referring to the National People’s Congress.
More Cash
China’s central bank added more cash on Wednesday into the financial system to meet a rapid rebound in loan demand.
Hong Kong’s benchmark Hang Seng Index dropped as much as 1.8%, while the CSI 300 Index of mainland shares fell 0.5%.
“It is a short-term correction and both HK and China markets will be likely to bounce back in March as the National People’s Congress will guide the markets with more policy support on different sectors of China’s economy,” said Lam of Ceb.
–With assistance from Abhishek Vishnoi and Ishika Mookerjee.
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