Hong Kong stocks make a dismal start to 2024 after China PMI report hints at sustained economic weakness

Hang Seng Index fell 14 per cent last year and in the four consecutive years of losses, it has declined 40 per cent in aggregate
China’s manufacturing activity shrivelled for the third straight month with PMI data showing contraction deepened

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:40am, 2 Jan 2024

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Hong Kong stocks dropped on the first trading day in 2024 after reports showed China’s manufacturing activity contracted for a third straight month and home sales of the nation’s top developers slumped.

The Hang Seng Index fell 1.5 per cent to 16,788.35 at the close. The Hang Seng Tech Index shed 1.3 per cent and the Shanghai Composite Index retreated 0.4 per cent.

Alibaba Group dropped 1.2 per cent to HK$74.70 after the e-commerce giant was ordered to pay 1 billion yuan (US$140.3 million) to rival JD.com by a Beijing court after losing an antitrust lawsuit. JD.com fell 2.4 per cent to HK$109.80.

Longfor Group Holdings sank 7 per cent to HK$11.62 and China Resources Land slid 5.4 per cent to HK$26.50 after sales at the nation’s biggest 100 developers tumbled 35 per cent from a year earlier last month. Chinese electric-vehicle maker Li Auto slumped 5.2 per cent to HK$139.40 and Chinese sportswear maker Li Ning fell 5.8 per cent to HK$19.68.

The purchasing managers’ index (PMI) of the manufacturing industry dropped to 49 from 49.4 in November, staying below the 50 reading that divides expansion and contraction for a third straight month, the National Bureau of Statistics said over the weekend.

“The persistent weakness may exert pressure on the Hong Kong and mainland China equity markets when investors return from the long weekend,” said Redmond Wong, a strategist at Saxo Markets in Hong Kong.

The December decline in sales of the nation’s top developers accelerated after the 30 per cent drop in November, according to data released by China Real Estate Information Corporation over the weekend. For the whole of 2023, sales dropped 17 per cent, it said.

The Hang Seng Index fell 14 per cent last year, making it the worst performing among major stock gauges globally. The four consecutive years of annual declines was the longest losing streak on record for the 82-member benchmark during which the index tracking Asia’s third-largest market has lost over 40 per cent. The entire market lost about US$500 billion in value in 2023, according to Bloomberg data.

In the New Year’s address that was broadcast on the state television station, President Xi Jinping admitted Chinese companies and people faced difficulties, and pledged further reforms and opening up to promote growth and stability.

Elsewhere, Chinese search engine operator Baidu lost 0.7 per cent to HK$115.30 after its US$3.6 billion bid for Joyy’s live-streaming business lapsed, following a failure to win approval from the Chinese regulator by the December 31 deadline.

Other major Asian markets rose. South Korea’s Kospi gained 0.6 per cent and Australia’s S&P/ASX 200 added 0.5 per cent. Japan’s market is closed for a public holiday.