In a turbulent session on Thursday, Hong Kong stocks couldn’t escape the regional equities sell-off, echoing the woes from rising US Treasury yields and persistent doubts about China’s property market. The Hang Seng Index slipped 1.3%, closing at 18,230.19, marking a hat trick of losses. Tech stocks didn’t fare much better, with the Hang Seng Tech Index shedding 0.3%, and the Shanghai Composite Index down by 0.6%.
Investor enthusiasm took a hit following a lackluster US Treasury auction, which stoked fears about supply and deficits, pushing bond yields higher and making equities look less appealing. Japan’s Nikkei 225 also dipped 1.3%, South Korea’s Kospi fell 1.6%, and Australia’s S&P/ASX 200 dropped 0.5%.
Hong Kong stocks have been on a rollercoaster, briefly enjoying a bull market bounce earlier in the year, but now they’re hunting for new motivation. The recent easing of property market restrictions in major Chinese cities like Shanghai and Guangzhou has yet to ignite much enthusiasm. Market watchers are also keeping an eye on corporate earnings, which remain a critical factor.
“The wild swings in Hong Kong stocks recently are because of congested trading and sluggish capital flows,” commented Wang Yang, an analyst at Zheshang Securities. “Earnings remain the big decider for market direction. But for now, the outlook for earnings among Hong Kong-listed firms hasn’t changed.”
According to Societe Generale, there’s a glimmer of hope as the breadth of earnings for Chinese companies—essentially the ratio of firms with upgraded earnings—has started to tick up. While revenue growth remains tepid, there’s a broadening recovery beyond just discretionary and communication sectors into investment areas, with consumer sectors likely to stay in the lead.
Eyes are now on China’s official manufacturing PMI, set for release on Friday. Analysts expect it to edge up to 50.5 in May, keeping it in the expansion zone for the third consecutive month.
(Source: Asia Financial | Market Watch | SCMP)
