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Hong Kong’s Stock Benchmark Marks Its Worst Start in Three Years

Hong Kong stocks declined on the first trading day of 2022 to mark their worst start to a year since 2019.

Hong Kong’s Stock Benchmark Marks Its Worst Start in Three Years
Pedestrians walk past an electronic screen displaying the closing figure of the Hang Seng Index in Hong Kong. (Photographer: Justin Chin/Bloomberg)

Hong Kong stocks declined on the first trading day of 2022 to mark their worst start to a year since 2019 amid weak sentiment on tech shares and ongoing concerns about the financial health of Chinese developers. 

The benchmark Hang Seng Index closed 0.5% lower, reversing from an earlier gain of as much as 0.9%. The gauge had risen in the first trading session in each of the last two years and dropped by 2.8% in 2019.

Alibaba Group Holding Ltd. slumped 3.3%, the most in nearly a month, to rank among the gauge’s biggest decliners amid concerns that some investors may pare stake after data showed the conversion of company’s American Depositary Receipts into Hong Kong shares has picked up pace. Chinese property shares also dropped. 

Hong Kong’s Stock Benchmark Marks Its Worst Start in Three Years

“Sentiment is generally still weak for China’s consumer-facing tech companies, not just from the risk of further regulations, but also difficult macro conditions due to fresh Covid-19 outbreaks and weaker consumption,” said Vey-Sern Ling, a senior analyst at Union Bancaire Privee. “Having said that, valuations are depressed and investors may be looking to add positions selectively.”

Liquidity was thin, with average volumes on the benchmark 56% below the 30-day average. A number of regional markets including China and Japan were shut due to the holiday. 

The slide extends weakness from last year after Beijing’s regulatory crackdown on everything from property to tech to private tutoring companies sent Hong Kong stocks tumbling. The benchmark gauge was the worst-performing major benchmark globally in 2021.

A Bloomberg Intelligence gauge of China real estate developers fell by 1.8%, led by Sunac China Holdings Ltd. Shares of closely-watched China Evergrande Group were suspended from trading in Hong Kong on Monday, citing a pending announcement. The halt follows a local media report that the company has been ordered to tear down apartment blocks in a development in Hainan province. 

Meanwhile, the Hang Seng Tech Index -- comprised of China tech stocks -- fell 0.5%, led by shares of Alibaba Health Information Technology Ltd. and Ming Yuan Cloud Group Holdings Ltd. Investors remain cautious given uncertainty over the regulatory risk this year.

©2022 Bloomberg L.P.