Hong Kong stocks have had the best start in the first three months of a year for the first time since 2015. However, this great run could be tested beginning this May as a benchmark gauge finds resistance at a key level.
The Hang Seng Index this year went up by 15% but it has since stagnated below 30,000 points as key indicators of the rally begin to fade.
Currently, mainland equities have weakened while the costs from local borrowing have gone up. Similarly, investors from China have withdrawn, with Hong Kong’s economic growth at its lowest level since the global financial crisis that occurred a decade ago.
Investors were hopeful that the Chinese economy would be better following the U.S. – China trade talks and data that depicted an improvement in the economy. The gauge went to almost 10- month high. Since then, the index has gone down by 1.4%. On Friday at 9:43 am, it went down by 0.8 %.
Investors see China stocks as weak since the Chinese government seems unwilling to add stimulus. However, China stocks are still the best performers in the world’s major markets this year. With such, investors are shying away from Hong Kong equities, the mainland trackers mostly.
Last week, Chinese investors saw the longest trading period of four days consecutively as they sold the city’s shares through trading links. This has not happened since the beginning of March. There has also been a fall in turnover and it’s expected the average value traded will further decline in the next four weeks.
The stock market may continue falling as the local economy cannot be able to salvage it. According to data posted last week, the gross domestic product of Q1 rose by 0.5%. This is the most sluggish rate registered since 2009 and it’s below what the economists expected.
Investors are likely to move towards higher-yielding assets since the Hong Kong equities will be unattractive as the greenback becomes stronger. The Federal Reserve did not send any sign of slashing interest rate making the dollar to rise on Thursday.