Hong Kong stocks cap longest losing streak in months on poor stimulus by China

Hong Kong stocks lost ground for the fourth consecutive day, this is now the longest decline in two months, as investors digested the absence of a more meaningful and forceful stimulus from China along with the fallout of Donald Trump’s re-election, according to a detailed report by the South China Morning Post.

The Hang Seng Index lost 0.1 per cent of its value and touched 19,823.45 on closing, completing a 5.4 per cent loss in the four-day run. Whereas the Hang Seng Tech Index dropped by about 0.1 per cent.

China indices bucked the trend

China benchmarks bucked the trend by going against this direction. The CSI 300 Index rose 0.6 per cent, and the Shanghai Composite Index also added 0.5 per cent.

Biopharmaceutical firm Wuxi AppTec and affiliate Wuxi Biology led the pack of decliners. Investors will also shift focus on a slew of earnings by major companies such as Tencent Holdings and Meituan this week, detailed the South China Morning Post report further.

Hang Seng Index fell below 20,000 for the first time since September 26

The Hang Seng Index closed below the 20,000-point mark for the first time since September 26 on Tuesday as investors moved to a defensive mode after the disappointing outcome of China’s legislative meeting last week.

The legislature’s standing committee only approved bond issuances to address local-debt issues, bringing down expectations of more measures to boost consumption and the employment rate.

“The current weakness seen in the Hong Kong stock market has been attributed to the lack of details of the promised fiscal stimulus measures from China to negate the ongoing deflationary spiral,” said Kelvin Wong, an analyst at Oanda.

He further stated that financial market participants have started losing confidence in the timing and willingness of China’s top policymakers to enact hard hitting measures to jump start consumer spending.

Threat of Trump trade and tariffs looms

The threat of Trump trade also put investors in Asia on the defensive. The US president-elect favours higher tariffs, trade protectionism and tax cuts, policies that will heighten geopolitical tensions, stoke inflation and hamper interest-rate cuts.

The trading pattern has already been reflected in some asset classes, with the yield in US Treasuries rising and gold prices falling from a record. Further, Bitcoin has also risen rapidly since the US election results.

UBS Global Wealth Management, a segment of the biggest bank in Switzerland, reduced its forecast for Chinese stocks due to the possibility of additional US tariffs and disappointing stimulus.

In this environment of geo-political tensions, global investors will now focus on the economic steps taken by the upcoming Trump administration. These developments will help investors in making more informed investment choices in future.