Chinese investors are pulling back from Hong Kong's stocks at the fastest pace in over five years, threatening to deepen a selloff. Onshore traders have sold a net HK$24 billion ($3.1 billion) of Hong Kong shares through a trading link in October through Thursday, putting the month on track for the biggest outflow since 2021. Mainland investors have traditionally been staunch buyers providing support during downturns, but their exit bodes ill for the financial hub where stocks have been on a three-month decline.
The Hang Seng Index has historically suffered extended pullbacks when Chinese flows turned negative. Jasmine Duan of RBC Wealth Management Asia warns the market could correct another 10% to 15% before establishing a bottom, noting sensitivity to US Treasury yields and fund flow dynamics. Technology stocks have borne the brunt, with Semiconductor Manufacturing International Corp., Alibaba Group Holding Ltd., and Xiaomi Corp. among those heavily sold. The benchmark gauge has lost 6.7% this month, set for the biggest decline since June, while the Hang Seng Tech Index is close to erasing gains from September's monetary stimulus.
For many Hong Kong-listed firms, investors remain concerned about higher capital expenditure impacting margins. A lackluster earnings start and Beijing's reluctance to roll out forceful fiscal stimulus have disappointed. Ping An Insurance reported a profit slump on falling investment returns, while Tsingtao Brewery missed estimates. Collapsing earnings estimates weigh on valuations, with experts looking for moderation in negative revisions and reduced competitive pressures to change sentiment.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing