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Hong Kong stock market
BusinessChina Business

Hong Kong stocks’ 7-day slump worst since August, while Shanghai index hits May 2020 low on Taiwan tensions

  • Strategists at Citigroup, HSBC trimmed their upside targets for the Hang Seng Index, citing concerns about interest rates and corporate earnings outlook
  • China cranks up cross-strait tensions ahead of Taiwan’s presidential election on Saturday

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Chinese national flag in front of screens showing stock market data outside the Exchange Square in Central, Hong Kong in August 2023. Photo: Reuters
Jiaxing Li
Hong Kong stocks fell for a seventh day as strategists at Citigroup and HSBC lowered their upside targets amid worries about China’s economic recovery. Beijing cranking up cross-strait tensions ahead of a presidential election in Taiwan further weighed on sentiment.

The Hang Seng Index declined 0.6 per cent to 16,097.28 on Wednesday, adding to the 5 per cent slump in the preceding six days to post the longest losing streak since mid-August. The Tech Index slipped 0.8 per cent to a 13-month low, while the Shanghai Composite Index weakened 0.5 per cent to the lowest since May 2020.

Tencent fell 1.2 per cent to HK$280.20, Alibaba Group retreated 0.6 per cent to HK$69.30 and chip maker SMIC lost 2.2 per cent to HK$17.22. AIA Group tumbled 1.8 per cent to HK$62.45, while HSBC declined 0.9 per cent to HK$62.90. EV maker BYD fell 1.4 per cent to HK$204.60 and peer Li Auto dropped 4.4 per cent to HK$125.20.

“Stock performance appears to be increasingly detached from economic reality and earnings fundamentals,” Yan Wang, chief China strategist at Alpine Macro, said in a report on Tuesday. “The poor equity market reflects investors’ extremely weak confidence and Beijing’s badly damaged policy credibility, both of which are not easy to fix.”

The Hang Seng Index’s 5.6 per cent slump this year is its worst start to a year in about two decades as sentiment has been affected by China’s persisting economic weakness and Beijing’s underwhelming policy response. Citigroup and HSBC trimmed their upside forecasts for the benchmark amid questions over corporate earnings.

Weaker home prices and fears about job security are likely to weigh on consumer spending, clipping retail sales growth in 2024, according to UBS. Government reports on Friday may show consumer prices in China fell in December, while external trade cooled, according to forecasts by economists.
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