The Hang Seng index touched a session low of 18,044.86 points earlier this week, which was 20.5% lower than its 52-week high of 22,688.9 points on January 27.
A technical bear market occurs when prices decline 20% from recent highs. The index recovered some of its intraday losses and finished the day 1.94% lower, just shy of entering bear market territory.
However, Hong Kong technology stocks were among the leading decliners for the overall index, which mainly included internet company NetEase and well-known e-commerce platforms, Meituan and JD.com.
Moreover, Alibaba chucked nearly 3%, Bilibili plunged by 6%, and Baidu dipped more than 4%.
The Hang Seng Tech index has already dropped more than 25% from its peak in January. This is in sharp contrast to the resurgent confidence that once propelled Asia’s benchmark MSCI Asia Pacific index into a bull market.
On the other hand, the Hang Seng China Enterprises index, which measures the performance of the 50 largest and most liquid mainland Chinese organisations listed in Hong Kong, has also recouped more than 21% from its January peak.
Although analysts initially anticipated that China’s economy would recover quicker and earlier than expected. However, that perception swiftly vanished as the country’s economic indicators continued to disappoint.
The latest manufacturing activity indicator for China was 48.8, falling short of the 50-point threshold that separates growth from contraction and falling short of the 49.4 estimate from a Reuters poll.
In the previous month, on May 17, a report by analysts at Morgan Stanley stated that a weak reading in that manufacturing measure “has been a solid precursor to policy easing.”
A disappointing rebound could lead to more government stimulus ahead, economists told CNBC.
Morgan Stanley analysts wrote in a note that “If growth does not accelerate sufficiently to narrow the output gap, social stability risk may rise and eventually trigger more meaningful stimulus.”
Additionally, the National Bureau of Statistics noted that the purchasing managers’ index for large manufacturers came in at 50, while on the other hand, the index for smaller manufacturers was comparatively lower.
The services activity index stayed in the expansionary zone at 54.5, but fell for the second month in a row.
Desiring a major concern
On Wednesday, the economists at Citi wrote in a note that the new economic data missing expectations by a large margin has been noticed as “signs of fatigue with the initial reopening impulse peaking.”
“Insufficient demand could be the major concern now, and there are both cyclical and structural causes for it,” the economists wrote, adding that the “initial boost to the services sector from reopening could be fading.”
Also, they predicted that the People’s Bank of China would reduce its medium-term lending facility rates by 20 basis points and its reserve requirement ratio by 50 basis points by the end of the year.
“We reckon that the Chinese economy could be on the verge of a self-fulfilling confidence trap and believe decisive policy actions are needed,” the economist wrote.
“There could be limited room for fiscal easing from the budget, and we expect structural easing efforts with more efforts from the central government and quasi-fiscal tools via policy banks,” they concluded.
- Published By Team Genuine Reporter