The Hang Seng Index fell 14% compared to the beginning of the year, and the Shanghai Index fell 11%.
Caused by China’s economic downturn and US investor avoidance
Loss of role as financial center due to Chinese government’s deprivation of autonomy
The New York Times (NYT) reported on the 29th (local time) that the Hong Kong stock market fell sharply again this year, ending the decline for the fourth consecutive year.
Last summer, to protect Hong Kong’s stock market from its endless decline, Hong Kong’s financial authorities lowered securities transaction taxes and worked to restore confidence in the market among European and American investors. However, the Hong Kong stock market has become the world’s lowest performing market again this year.
The Hang Seng Index closed on the 29th, the last day of trading, down 14% from the beginning of the year. Mainland China’s stock market also fell this year, with the CSI 300 index, which includes companies in Shanghai and Shenzhen, down 11% from the beginning of the year.
Fund managers and pension funds withdrew hundreds of billions of dollars from the Hong Kong stock market. The Chinese economic downturn and American investors’ avoidance of investing in Chinese companies played a role.
Chetan Set, Asia strategist at Nomura Bank in Japan, said: “Companies in the Hang Seng Index are fundamentally dependent on China’s economic growth. “China’s weak economy has affected the performance of Chinese companies listed on the Hong Kong stock exchange,” he said.
The decline in Hong Kong and Chinese stock markets contrasts with the boom in the U.S. stock market. The New York stock market’s S&P 500 index rose 25% this year.
At the beginning of the year, investors expected China’s economy to rebound from pandemic lockdowns. However, after three years, China completely lifted the blockade, but the Chinese people did not increase spending, and the private sector contracted, causing the economy to stagnate. The deepening real estate crisis has worsened the economic downturn and also affected Hong Kong. Most Chinese private real estate development companies that borrowed excessively from foreign investors in Hong Kong went bankrupt.
Chinese real estate companies listed on the Hong Kong Stock Exchange recorded the worst performance. Biguiyuan lost three-quarters of its corporate value.
Hong Kong Finance Minister Paul Chan claims that the stock market decline was due to “misunderstandings caused by Western political prejudice” as the conflict between the United States and China reached its worst point this year. However, the Hang Seng Index has fallen for four consecutive years until this year, and the decline in Hong Kong’s role as an Asian financial center during this period is largely due to China’s imposition of the National Security Law.
In 2019, as large-scale pro-democracy protests took place in Hong Kong, the Chinese government suppressed them with the National Security Law, and with the pandemic lockdown, more than 100,000 people left Hong Kong. Many Hong Kong professionals still want to leave Hong Kong. As a result, it has become difficult for Hong Kong to find the manpower needed to function as a financial center. This is the background to growing concerns among investors from around the world about Hong Kong’s loss of autonomy.
The Hong Kong stock market has run out of new listings this year. As the listing price hit its lowest level since 2001, large-scale layoffs occurred at financial institutions.
Many multinational companies have stopped hiring new employees in Hong Kong. As the inflow of funds into the Hong Kong stock market decreased and the trading volume decreased, many securities firms closed.
China’s economic downturn, the international situation, elections in major countries such as the United States, and central bank movements are expected to have a negative impact on the Hong Kong stock market next year.
“2024 will be a year of great uncertainty,” Finance Minister Chan said in an interview with the South China Morning Post.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.