Hong Kong stocks continued their downward trajectory in the new year, as investor concerns over Beijing's response to economic challenges deepened. The benchmark Hang Seng Index recorded a 2.3% decline, reaching its lowest level since October 2022. This marked a 12% loss since the beginning of 2024, making it Asia's worst-performing major index this year.
The selloff was largely driven by apprehension regarding the Chinese central bank's decision to keep its loan prime rates unchanged. Investors interpreted this move, along with the unchanged interest rates last week, as an indication that Beijing may not be taking sufficient steps to stimulate the Chinese economy. Sonija Li, Maybank's head of retail research, commented, "Although the hold was largely expected, the market still raised concern over how and what the Beijing government will do to prop up the economy."
The property sector took a particularly hard hit, with the Hang Seng Properties Index experiencing a 4.6% drop to its lowest level since 2009. The Hang Seng Mainland Properties Index fared even worse, slumping by 6.9%.
The selloff extended beyond the property sector to other industries including technology, autos, and consumer products. Notably, large property developers experienced losses of more than 5%, with Kaisa Group witnessing a sharp drop of 21% and Longfor Group losing over 10%. Tech giants Tencent and Meituan also faced significant declines, with losses of 3.3% and 4.7% respectively.
Saxo Bank analyst Redmond Wong highlighted the lack of buying interest due to historically low valuations. He stated, "The economic recovery in China fails to gather momentum and businesses are lacking confidence." Wong also noted Premier Li Qiang's recent dismissal of "major stimulus" as a tool for short-term growth, further dampening investor hopes for policy measures.
As the market seeks stability, investors must navigate uncertain terrain. The ongoing search for a bottom suggests that the situation may not improve in the immediate future.