June 1, 2023: Hong Kong’s benchmark index briefly dipped into bear market territory Wednesday on an intraday basis, erasing the rebound gains from China’s reopening.
The Hang Seng index hit a session low of 18,044.86 points. That was 20.5% below its 52-week closing high of 22,688.9 points reached on Jan. 27. A technical bear market is defined as when prices fall 20% below recent highs. The index pared some intraday losses and closed 1.94% lower, just shy of bear market territory.
Hong Kong technology stocks were among the leading decliners for the overall index, including internet company NetEase and e-commerce platforms Meituan and JD.com. Alibaba shed nearly 3%, Baidu fell more than 4%, and Bilibili plunged by 6%.
The Hang Seng Tech index has fallen by more than 25% from its January peak. That starkly contrasts the reopening optimism that once drove Asia-Pacific’s benchmark MSCI Asia Pacific index to a bull market.
The Hang Seng China Enterprises index, which measures the performance of the 50 most significant and most liquid mainland Chinese companies listed in Hong Kong, has also retreated by more than 21% from its January peak.
Analysts initially expected China’s economy to recover faster and earlier than expected, but that view quickly faded after the country delivered disappointing economic data.
China’s latest factory activity reading came in at 48.8, below the 50-mark that separates growth from contraction, missing 49.4 estimates from a Reuters poll.
Morgan Stanley analysts said in a May 17 report that a weak reading in that manufacturing measure “has been a solid precursor to policy easing.” Economists told CNBC that a disappointing rebound could lead to more government stimulus ahead.
“If growth does not accelerate sufficiently to narrow the output gap, social stability risk may rise and eventually trigger more meaningful stimulus,” Morgan Stanley analysts wrote in the note.
The National Bureau of Statistics noted the purchasing managers’ index for large manufacturers came in at 50, while that of smaller manufacturers was lower. The index for services activity remained in the expansionary territory at 54.5 but marked a second-straight month of decline.
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