The Stock Market Decline in Hong Kong

The Stock Market Decline in Hong Kong

by June 7, 2021

It’s fair to say that the global stock markets have endured a tumultuous 14 months, from the sudden, coronavirus-inspired crash in March 2020 to the subsequent peaks that were witnessed during the summer.

This trend continued last week, as shares in Asia-Pacific remained mixed against the backdrop of various data releases from Australia and China.

Hong Kong’s Hang Seng index led losses regionally, falling by 1.13% on the day to 28.966.03. We’ll explore this further below, while asking what factors have contributed to this decline.

The Rise and Fall of Hong Kong Stocks

This slight market slump followed a period of pronounced growth in May, when Hong Kong stocks climbed to a three-month high following a positive report that revealed the expansion of Chinese manufacturing during the same timeframe.

More specifically, the same Hang Seng index jumped by a whopping 1.1% to 29,468 at the end of May, representing the highest daily gains since March 3rd.

This was also partially thanks to sustained gains amongst technology stocks, which accelerated during late trading to provide a timely market boost. However, the tailwind in Chinese manufacturing was the single most telling factor, with the nation having unveiled measures to help spur growth and rejuvenate the sector after the trials and tribulations of 2020.

It’s interesting to note that the recent decline in HK stocks was also influenced by price fluctuations in the Chinese markets. Chinese stocks finished last week trading considerably lower, with the Shanghai composite slipping by 0.36% to 3,585.21

At the same time, the Shenzhen component shed 0.651% to 14,761.13, while China’s influential Caixin/Markit services Purchasing Managers’ Index fell from 56.3 in April to 55.1.

This has undoubtedly had an impact on Hong Kong share prices, while the data has also influenced the minds of traders on forex brokerage sites.

Has the Tech Stock Retreat Impacted on HK Shares?

It’s also interesting to note that the Chinese tech stocks which rallied hard during the month of May surrendered some of their gains in early June, with the Hang Seng Tech Index having lost almost 1% in a relatively short period of time.

Meituan fell back by 0.4% to HK$311.80, for example, halting an 18% rally in the previous two days. The Alibaba Holding Group also sank by 1.7% to HK$214.40, while its unit Alibaba Health Information Technology slid by 1.6% to HK$19.40.

At the same time, WuXi Biologics tumbled by 3.8% to HK$120.90, as the core catalysts which propelled growth in April and May faded and the tide turned across most Asia-Pacific stocks.

Make no mistake; the Hang Seng indexes’ 55 members added a staggering $53.3 billion in market value during these eight weeks, driving huge sentiment amongst investors and traders across the board.

So, investors will be searching for new triggers as the market begins to correct itself, particularly as global uncertainty continues to impact tech and manufacturing stocks.