Hong Kong stocks stumble as fund managers bet on market pullback before Lunar New Year holiday

The Hang Seng Index has gained almost 50 per cent from October 31, while the MSCI China Index has produced the best start to a year since 1996

Trading in Hong Kong and mainland China will pause for the Lunar New Year holiday next week

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A child poses for a photo among rabbit-shaped lanterns at Xuan’en County in central Hubei province on January 15. Photo: Xinhua

Published: 10:32am, 19 Jan 2023Updated: 4:51pm, 19 Jan 2023

Hong Kong stocks slipped as money managers called for a pullback following the best start to a year in Chinese equities since 1996. Trading slowed before the Lunar New Year holiday next week.

The Hang Seng Index fell as much as 1.4 per cent, the most in more than four weeks, before paring the loss to 0.1 per cent at 21,650.98 at the close. The Tech Index declined 1.7 per cent and the Shanghai Composite Index added 0.5 per cent.

Some of the benchmark index’s biggest members led losses. Alibaba Group slid 1.7 per cent to HK$112.20 and JD.com lost 1.5 per cent to HK$231.80. Meituan retreated 2.1 per cent to HK$160.20. Kuaishou Technology tumbled 6 per cent to HK$68.15 after a co-founder cut his stake in the short-video platform operator.

Hong Kong-based fund managers were banking on a 5 to 10 per cent retreat in Chinese equities before the Lunar New Year holiday that starts from January 22, according to a survey this month by Bank of America. They expect to buy the dips, the survey showed.

“Hong Kong stocks will most probably switch to a consolidation pattern after the recent surge,” Ping An Securities said in a report. “The stock pick strategy should focus on industry sentiment and individual valuations.”

Transactions in Hong Kong stocks amounted to about 10 per cent below the 30-day average at this time of the day, according to Bloomberg data. The city’s market will be shut for three days next week, while those in mainland China will be closed for the whole week.

Even so, sentiment has turned cautious after the Hang Seng Index chalked up almost 50 per cent gain from end-October, sending the gauge and key members into technically overbought levels, and suggesting a reversal is imminent.