Hong Kong stocks set for worst week since August as tech gauge hits record-low with imminent end of easy-money policies

  • Hang Seng Index has lost 5.6 per cent this week, the worst since the week ending August 20, amid global risk aversion
  • Analysts are hopeful China’s policy-easing impetus will cushion the blow, countering the tightening bias in the US

Hong Kong stocks were headed for the worst week in five months as Chinese tech companies hit new lows. An imminent tightening in the US fuelled concerns about the end of “easy money” policy since the last global financial crisis.

The Hang Seng Index slipped for a second day, losing 0.8 per cent to 23,606.45 at the local noon trading break. The setback extended this week’s losses to 5.6 per cent, the worst since the 5.9 per cent loss in the five days to August 20, according to Bloomberg data.

Global risk assets were hammered this week, erasing billions of market value from stocks to cryptocurrencies. The Federal Reserve said it planned to start raising rates in March and cutting back on its bond-purchase programme soon, ending its super-accommodative policy since the 2008 crisis.

“The tightening of the monetary policy stance of the central bank… amid a backdrop of slowing growth is likely to present a challenge for growth-fuelled risk assets,” said Nikolaj Schmidt, chief international economist at T. Rowe Price, in a note published on Friday.

The S&P 500 Index fell 1.6 per cent this week, reversing from record-highs in recent weeks. The yield on US 10-year Treasuries climbed to 1.82 per cent this week versus 1.51 per cent at the start of the year.

The Hang Seng Tech Index tumbled 2 per cent, slipping to its lowest level since its inception in July 2020. JD.com lost 3.5 per cent and Meituan declined 0.8 per cent, while NetEase fell 1.7 per cent. Alibaba Group Holding, however, climbed 1.1 per cent from an all-time low.

Mainland Chinese stocks have weakened this week before a five-day trading pause for the Lunar New Year. Some analysts argued China’s policy-easing impetus will cushion the blow. The CSI 300 Index, which tracks the biggest stocks in Shanghai and Shenzhen, has retreated by more than 20 per cent from its peak in February into bear territory.

“From the US-China monetary policy divergence in 2014 to 2015, we expect Chinese stocks to react more positively than other major stock markets to changes in monetary policies in coming months,” said Daniel So, analyst at CMB International, in a note published on Thursday. “In all the previous three interest-rate downcycles in China, growth stocks outperformed value stocks.”

Two stocks started trading on Friday. Jiangsu Smartwin Electronics Technology jumped 29 per cent on its debut, while SEP Analytical Shanghai Co surged 84 per cent.

Major Asian markets advanced. Japanese and Korean shares rose at least 1.9 per cent, while the Australian benchmark gained 2.2 per cent.

Author: Cheryl Heng, SCMP

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