The Hang Seng Index, Hong Kong’s benchmark stock index, ended the last trading day of 2023 at 17047.39, down 14% from the prior year. This marks the fourth consecutive year of decline for Hong Kong’s stock market, which includes stocks of many Chinese companies like Alibaba (HK:9988), Tencent (HK:0700), and NetEase (HK:9999).
What is Behind the Slump in the Hang Seng Index?
The Hang Seng is one of the worst-performing stock markets this year. Its movement has been in contrast to the strength seen in the stock markets of several other countries like the U.S., Japan, and India.
Hong Kong’s stock market was once the preferred destination for foreign investors. However, the country has fallen out of favour in recent years due to the impact of COVID-19, the growing tensions between the U.S. and China, and the economic downturn in China.
Several stocks trading on the Hang Seng Index are associated with companies that rely on the economic growth of China. A slower-than-anticipated recovery following the reopening of the Chinese economy after stringent pandemic-induced lockdowns impacted investor sentiment.
Moreover, the real estate crisis in China made matters worse, with Hong Kong-listed Chinese property companies featuring among the worst-performing stocks this year. For instance, shares of Country Garden Services (HK:2007) have declined 71% this year, while Longfor Group (HK:0960) stock has declined about 49%.
Also, China’s regulatory crackdown on tech firms over recent years has also weighed on the stocks. Most recently, the country announced certain regulations that dragged down the shares of Tencent and NetEase.
While Hong Kong is taking steps like lowering stamp duty on securities trading, things ahead do not seem to be positive. In an interview with CNBC earlier this month, Hong Kong’s financial secretary, Paul Chan, said that next year will be “full of external challenges,” like high interest rates, persistent geopolitical tensions, and elections in the U.S.
Meanwhile, using TipRanks’ database, we found three Hong Kong-listed stocks that analysts are bullish about despite an uncertain backdrop. These are Galaxy Entertainment (HK:0027), Alibaba, and Tencent.
