Hong Kong’s benchmark index soared 26.6% in November – the Hang Seng index’s highest month-to-month acquire since October 1998, or close to the tip of the Asian monetary disaster 24 years in the past.
However the index still sits in bear market territory, which is outlined as down 20% from a latest excessive, standing at a lack of 20.45% loss year-to-date as of Dec. 2.
Hong Kong’s economic system, together with its inventory market, has been battered by Beijing’s extended zero-Covid coverage that has shut out vacationers from mainland China and dampened shopper confidence. Shares listed in Hong Kong have whipsawed between sell-offs and rallies inside a single buying and selling day on unconfirmed rumors that hinted at a shift in China’s insurance policies.
The volatility in the Hong Kong inventory market, nonetheless, dates again even additional than this yr. Strategists at Goldman Sachs mentioned from February 2021 to October 2022, the Hang Seng index noticed a “systemic correction,” which the agency defines as a fall of 40% or extra.
Throughout that interval, the HSI plunged 53% from peak-to-trough, Goldman strategists famous.
“This is the most significant market sell-off since the dislocation during the Global Financial Crisis, also putting the drawdown into the Systemic category per our classification,” the agency’s China fairness strategists Kinger Lau and Si Fu instructed CNBC in an electronic mail.
The crew added that it is “impossible to call the market bottom” for the index, based mostly on its buying and selling patterns, which has proven main volatility in the previous two years.
Subsequent key ranges
Analysts at Weiss Multi-Technique Advisers mentioned, “November may, in hindsight, be viewed as a key turning point for Chinese equities,” noting the Hang Seng China Enterprise index and the property sector noticed vital positive factors.
“Property stocks were boosted by relaxed collateral and equity issuance standards, and tech stocks have been strong on earnings and reopening hopes,” the analysts mentioned in a report.
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After its November positive factors, the Hang Seng index hovered round 18,600 – a stage of resistance in keeping with market watchers.
“With the 18,600 level of resistance being overcome for the Hang Seng Index, that could seem to place the key psychological 20,000 level on watch,” IG market strategist Yeap Jun Rong mentioned in a Thursday notice.
He added the newest messaging from the Chinese language authorities, together with well being officers encouraging aged vaccination and broader indicators of shifting away from its zero-Covid insurance policies, has lifted the area’s inventory market.
“Recent events have been supportive of the worst-is-over stance for Chinese markets,” he mentioned, including that the occasions have led to a “much-needed calm” to Chinese language equities that proceed to push greater on reopening hopes.
The HSI final fell beneath the 20,000 stage in August, and analysts anticipate to see a continued rebound in the fairness market on additional indicators that the nation will shift away from zero-Covid.
The strategists said the monthly stock performances seen in November support that view.
“These cycle analyses point to a strong prospect that the market could stage a recovery rally sometime in 2023 after a very challenging performance in the past 2 years,” they said in an email to CNBC.
“The reopening catalyst could help fuel the cycle shift to a ‘Hope’ phase,” they said, “where equity valuations tend to expand [or] recover despite a still-challenging earnings outlook.”
— CNBC’s Evelyn Cheng contributed to the story
