The View | Don’t read too much into the Hang Seng Index’s remarkable November comeback

Nicholas Spiro says Hong Kong’s benchmark index has made a dramatic recovery, ahead of a cooling-off period in the trade war. But uncertainties loom in both the US and Chinese economies, to which the index is tightly linked

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People walk past a stock board in Hong Kong. The 6 per cent rise in the Hang Seng Index last month has got to be one of the most remarkable recoveries this year. But the index is tightly linked to the US and Chinese economies, where uncertainties loom. Photo: AP

Published: 2:15pm, 3 Dec 2018Updated: 10:27pm, 3 Dec 2018

As far as rebounds go, the 6 per cent rise in the Hang Seng Index last month has got to be one of the most remarkable this year. Hong Kong’s benchmark gauge not only outperformed the MSCI All Country World Index, which rose 1.3 per cent, but also came back from its longest losing streak since 1982, according to data from Bloomberg. Even emerging markets, which performed the strongest among the main regions last month, lagged behind the Hang Seng.

For a leading index that is acutely sensitive to developments in both China and the United States, the Hang Seng’s outperformance is striking, considering the trade war between the world’s two largest economies. Although the Chinese and US presidents declared a ceasefire at a meeting last Saturday, following the G20 summit in Argentina, the issues that gave rise to the conflict remain unresolved.

Chinese President Xi Jinping (left) and US President Donald Trump called a truce in the trade war on December 1, after the G20 summit in Buenos Aires, Argentina. Photo: Reuters

So what accounts for the Hang Seng’s impressive gains? A significant part of November’s rally stems from the dramatic recovery in the shares of Tencent Holdings, the Chinese internet giant that is Hong Kong’s largest listed company with a 9 per cent weighting in the index.

After plunging 38 per cent between early June and late October, Tencent’s stock has since risen 22 per cent, buoyed by stronger-than-expected third-quarter earnings despite a regulatory clampdown that threatens the firm’s core games business. According to data from Bloomberg, Tencent enjoyed its best monthly performance on record versus Apple, whose stock plummeted a further 19 per cent last month.

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.css-1m2rp1p{color:#34b8b5;}The View | Don’t read too much into the Hang Seng Index’s remarkable November comeback

The View | Don’t read too much into the Hang Seng Index’s remarkable November comeback