Year-end Turbulence: Hong Kong Stocks Decline Amidst Unprecedented Four-Year Loss Streak

The final trading day of 2023 saw Hong Kong stocks experiencing a decline, driven by investors capitalizing on recent gains, which had propelled prices to four-week highs. This downturn marked an unprecedented fourth consecutive year of losses for the local market. The Hang Seng Index dropped by 0.5 percent to 16,966.77 during the local noon trading break, bringing this week’s overall advance to 3.8 percent. In contrast, the Tech Index slipped by 0.8 percent, while the Shanghai Composite Index managed a 0.3 percent increase.

Tech giants Tencent and NetEase faced setbacks, with Tencent weakening by 1 percent to HK$290, and NetEase declining by 2 percent to HK$138.30, interrupting a rebound observed earlier in the week. Alibaba Group also fell by 0.8 percent to HK$75.25, and JD.com slipped by 0.7 percent to HK$111.80. Meanwhile, smartphone manufacturer Xiaomi experienced a significant 5.8 percent drop to HK$15.34, and China’s largest chip maker, SMIC, retreated by 2.9 percent to HK$19.62.

The Hang Seng Index, comprising 82 members, faced a decline of approximately 14 percent throughout the year, making it the worst-performing major stock index globally. The broader stock market in the city lost a staggering US$523 billion in market value, according to Bloomberg data. Notably, the top three losers – Li Ning, Country Garden Services, and Zhongsheng Group – suffered slumps ranging from 53 to 69 percent.

Brock Silvers, Managing Director at Kaiyuan Capital in Hong Kong, expressed concern over Hong Kong’s role as an Asian financial powerhouse, stating, “Hong Kong’s equity market is likely to face challenges in slower growth in turnover and financing activities in 2024.” Silvers highlighted struggles among Chinese developers and local governments, coupled with investability and geopolitical concerns, as factors that could overshadow any cyclical gains in the coming year.

Despite a weekly gain that marked the best since end-July, fueled by the recovery of video-gaming giants Tencent and NetEase, Gary Ng, Senior Economist at Natixis, emphasized potential challenges for Hong Kong's equity market in the next year. He noted, "With China’s policy risk and geopolitical tensions in play, it is still questionable if investors return to the city versus other more appealing alternatives.”

In other market developments, UBTech Robotics experienced a climb following the completion of the final stock offering of the year. Two stocks, UBTech Robotics and Dalian Dalicap Technology, debuted on Friday, with UBTech Robotics rising by 0.1 percent to HK$90.10 in Hong Kong and Dalian Dalicap Technology surging by an impressive 233 percent to 29.63 yuan in Shenzhen.

Asian markets, on the whole, exhibited a downward trend on Friday. Japan’s Nikkei 225 lost 0.3 percent, the S&P/ASX 200 Index in Australia declined by 0.4 percent, while South Korea’s Kospi Index remained relatively unchanged. The overall market sentiment reflected a complex landscape, with challenges and uncertainties impacting various sectors in the Asian financial landscape.

By fLEXI tEAM