Chinese stocks in Hong Kong briefly slip into bear market as nation’s recovery outlook worsens

The Hang Seng China Enterprises Index fell by as much as 1 per cent in intraday trading, taking its decline from this year’s peak on January 27 to 20.4 per cent

Sell-offs in China assets have deepened after economic data trailed estimates in April and declines in factory-gate prices accelerated, raising doubts about the outlook

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The sell-off in the shares of Chinese companies listed in Hong Kong has accelerated amid doubts about the nation’s economic recovery. Photo: Bloomberg

Published: 3:48pm, 30 May 2023Updated: 7:36pm, 30 May 2023

The Hang Seng China Enterprises Index (HSCEI), which tracks Chinese companies trading in Hong Kong, briefly slipped into a bear market, as sell-offs in China assets intensified amid mounting worries about the sustainability of the country’s post-Covid recovery and worsening ties between Beijing and Washington.

The HSCEI declined by as much as 1 per cent to 6,189.38 on Tuesday, taking its decline from a January 27 high to 20.4 per cent. A 20 per cent decline is technically seen as bear-market territory. The city’s benchmark Hang Seng Index is also nearing a bear market, having slumped 18 per cent from this year’s high in January.

The HSCEI reversed the intraday loss to close 0.5 per cent higher as dip-buying set in.

“China’s economic momentum will weaken and more friction is expected on the geopolitical front,” said Fu Beijia, a fund manager at HSBC Jintrust Fund Management in Shanghai. “Furthermore, overseas monetary policies and liquidity issues will also amplify the swings in the Hong Kong market.”

People at a street market in Shanghai. China’s economic recovery has post-Covid recovery has lost momentum. Photo: Reuters

Sell-offs in China assets have deepened this week after economic data trailed estimates across the board in April and declines in factory-gate prices accelerated, underscoring a faltering outlook for the economy after the dismantling of pandemic curbs spurred a mild recovery.

The CSI 300 Index of the most liquid onshore stocks fell into negative territory last week after reversing this year’s gain, while the Chinese yuan weakened to breach the 7 level against the US dollar for the first time since December this month.