Pedestrians walk past an electronic screen displaying the Hang Seng Index, left, in the Central district of Hong Kong, China. (Photographer: Anthony Kwan/Bloomberg)

Hong Kong Sets Worst Annual Loss in Years, Joining Global Stocks

(Bloomberg) -- Hostage to everything from the U.S.-China trade dispute, a global tech sell-off and interest rate hikes, this has been one of the toughest years for Hong Kong stocks.

The benchmark Hang Seng Index ended the year down 14 percent, the worst since 2011, with technology shares and trade-war proxy WH Group Ltd. among the most sold. Heavyweight Tencent Holdings Ltd. posted its steepest annual loss on record, while drugmakers also joined the worst-performer list following a recent sell-off.

Hong Kong shares traded for half the day on Monday as 2018 came to a close. The Hang Seng climbed 1.3 percent. WH Group was among top performers after U.S. President Donald Trump touted “big progress” in trade talks with his Chinese counterpart Xi Jinping.

Hong Kong Sets Worst Annual Loss in Years, Joining Global Stocks

The liquid Hong Kong stock market, which has many Chinese listings, is vulnerable to shifts in sentiment. Concerns over slowing economic growth in China -- the latest sign being the weakest manufacturing purchasing managers’ index since early 2016 -- coupled with an increase in borrowing costs by the Federal Reserve, have dragged down every sector on the broader Hang Seng Composite gauge this year apart from utilities. Hong Kong imports its monetary policy from the U.S. due to a currency peg.

The local dollar has slipped 0.24 percent against the dollar this year, trading at the weak end of its permitted band much for several months as the interest-rate spread between the U.S. made it lucrative to short the currency. Hong Kong’s de facto central bank intervened repeatedly since April to defend the peg.

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