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Hang Seng Index
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Hong Kong stocks slump as January bull run triggers caution and CNOOC exits MSCI indices while mainland funds taper purchases

  • The Hang Seng Index suffered its biggest loss since November 30 as markets enter an overbought zone while mainland funds tapered their purchases
  • CNOOC, Geely Auto and Xiaomi were among the biggest losers as prices retreated by 3.7 per cent to 5.6 per cent

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A screen showing stock prices near the Exchange Square in Central, Hong Kong. The Hang Seng Index has struggled to tackle the 30,000 hurdle after several attempts this week. Photo: Nora Tam
Iris Ouyang
Hong Kong stocks slumped by the most in nearly eight weeks after a bullish start to the year drove the market into the overbought zone and mainland traders trimmed purchases. The worsening pandemic situation resulting in renewed lockdowns and tightened restrictions in China and overseas also hurt sentiment.
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The Hang Seng Index slid 1.6 per cent to 29,447.85 on Friday, the biggest setback since a 2.1 per cent sell-off on November 30, according to Bloomberg data. CNOOC plunged after MSCI decided to delete it from some indices.

The Shanghai Composite Index dropped 0.4 per cent to 3,606.75, reducing the gain this week to 1.1 per cent.

The Hang Seng Index had risen more than 10 per cent this year through Thursday when it surpassed the 30,000 level for the first time since May 2019. It still logged a 3.1 per cent gain for the week, aided by record inflows of mainland cash through the southbound channels of the Stock Connect programme.

“The stocks have risen quite a lot recently, when it broke 30,000 points and investors reached their short-term goals, they tend to take profit at a high level,” said Linus Yip, chief strategist at First Shanghai Securities. “Although funds usually have long-term arrangement [in their new portfolio], the market still will have consolidation when they stopped buying [at a high price].”

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Markets retreated as the bull run encountered two immediate barriers. The surge in January has catapulted the market above 70 on the relative strength index, a technical threshold deemed as an “overbought” zone, which typically signals a trend reversal.

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