Hang Seng Index thuds to a four-month low, as May sees index rattled for 9.4 per cent loss
- Hong Kong’s Hang Seng Index share benchmark retreats 0.79 per cent on Friday, bringing loss for the month to 9.42 per cent
- Foreign investors accelerated their exit from mainland equities during May, reflecting the largest single month of selling through exchange links since December 2016
Hong Kong and China equity indexes ended May trade with respective monthly losses, led lower by the sustained selling in the mainland’s blue chip CSI 300 index, which posted a loss of 7.24 per cent for the period as investors fretted that the escalation of the US-China trade war could spin the world into a recession.
The Hang Seng Index closed out Friday trade down 0.79 per cent or 213.79 points at 26,901.09. The level was its lowest since mid-January, dragging its loss for May to 9.42 per cent. Analysts expressed concern that further downside could be in store next week, now that the blue chip index has broken through the 27,000 level.
Data released Friday morning showed China’s manufacturing purchasing managers’ index (PMI) – a gauge of sentiment among factory operators – fell to 49.4 in May, after April’s 50.1. The reading was below the median expectation of a poll of Bloomberg analysts. A reading below 50 signals activity is contracting.
“The May PMI is only one snapshot of how existing tariffs that have been implemented had affected China. The extent of the impact from the increase in US tariff on US$200 billion Chinese imports, which went up to 25 per cent from 10 per cent in May, would still need some time to be fully reflected,” said Ben Kwong, a director of KGI Asia in Hong Kong.
Kwong, sees further downside for the Hang Seng Index at 26,700. If that level is breached, a decline to 26,000 could be expected, he said.
A calculation by Chinese media showed that the northbound stock connect, which allow foreign investors to access mainland equities, saw net outflows of 53 billion yuan (US$7.78 billion) for May. Net outflows occurs when selling transaction value outweighs buying.
This week, market watchers expressed concern about the inversion of the US Treasury yield curve, with the yield of the 10-year US Treasury falling below the three-month yield, which is usually interpreted as a signal of looming recession.