ECONOMIC WOES WEIGH ON MAINLAND STOCKS
HSCEI briefly slips into bear-market territory amid fears over post-Covid recovery and geopolitical risks before reversing losses to end 0.5pc higher
The Hang Seng China Enterprises Index (HSCEI), which tracks mainland firms trading in Hong Kong, briefly slipped into a bear market as sell-offs in Chinese assets intensified amid mounting worries about the sustainability of the country’s post-Covid recovery and worsening ties between Beijing and Washington.
The gauge dropped by as much as 1 per cent to 6,189.38 points yesterday, taking its loss from a January 27 high to 20.4 per cent. A 20 per cent decline is technically seen as entering the bear-market territory.
The city’s benchmark Hang Seng Index is also nearing a bear market, having slumped by 18 per cent from this year’s high in January.
The HSCEI reversed the intraday loss to close 0.5 per cent higher as dip-buying set in.
“China’s economic momentum will weaken and more friction is expected on the geopolitical front,” said Fu Beijia, fund manager at HSBC Jintrust Fund Management in Shanghai.
“Furthermore, overseas monetary policies and liquidity issues will amplify the swings in the Hong Kong market.”
Sell-offs in Chinese assets have deepened this week after economic data trailed estimates across the board in April and declines in factory-gate prices accelerated, underscoring a faltering outlook for the economy after the dismantling of pandemic curbs spurred a mild recovery.
The CSI300 Index of the most liquid onshore stocks fell into negative territory last week after reversing this year’s gain, while the yuan weakened to breach the 7 level against the US dollar for the first time since December this month.
Of the 50 HSCEI constituents, e-commerce giant JD.com and sportswear makers Li Ning and Anta Sports Products topped the list of worst performers, dropping by at least 35 per cent from this year’s peak. The best performers are PetroChina and China Petroleum and Chemical Corp, which each rose by at least 17 per cent as investors seek haven in undervalued state-backed giants.
The index has experienced a roller-coaster ride in the past few months, having surged by nearly 60 per cent from an October low before giving up all the gains sparked by the reopening trade.
It last slipped into a bear market in September as Beijing’s adherence to the zero-Covid policy dimmed the growth outlook.
The HSCEI has a market capitalisation of HK$6.89 trillion, compared with HK$11.2 trillion for the Hang Seng Index.
There is no sign of the turmoil roiling Chinese assets coming to an end soon.
Global fund managers are on course for two consecutive months of net selling of onshore stocks, having sold about 9 billion yuan (HK$9.96 billion) this month.
An official purchasing managers’ index of the manufacturing industry may contract for a second consecutive month in May, according to economists’ estimates tracked by Bloomberg. The data is due today.