Half-year Hong Kong stocks report card: shares drop 11% on Fed pivot, lack of AI play
City’s exchange ranks among world’s worst performers as IPOs vacuum up capital and lock-up releases loom
Hong Kong stocks closed out the first half with a loss, ranking the city’s market among the worst performers globally, as a shift by the Federal Reserve and a dearth of pure exposure to artificial intelligence put investors on tenterhooks.
The Hang Seng Index dropped 11 per cent in the January-to-June period, underperforming most of the world’s key equity benchmarks, from the S&P 500 to the Nikkei 225. The Hang Seng Tech Index fared even worse, finishing the six-month period with a decline of 19 per cent.
Stocks listed in mainland China also beat their Hong Kong counterparts in the span, with the benchmark CSI 300 Index rising 7.6 per cent amid a bull run on AI hardware stocks. Cambricon Technologies, dubbed China’s challenger to Nvidia, exceeded 1 trillion yuan (US$147.2 billion) in market capitalisation after a 76 per cent gain this year.
Hong Kong stocks struggled as fears of capital outflows and an absence of companies directly embedded in the AI supply chain offset optimism from a de-escalation of military tensions in the Middle East. Yields on US Treasuries rose after new Fed chair Kevin Warsh struck a hawkish tone in his first rate-decision meeting, indicating rising odds of higher rates. Hong Kong was also left out of the frenetic global AI trade, with the benchmark’s heavyweights from Alibaba Group Holding to Tencent Holdings yet to convince investors of AI monetisation.
“In the near term, Hong Kong stocks are held back by tighter liquidity overseas and other headwinds”, such as a peak of initial public offerings (IPOs) and the release of lock-up shares, said Fang Yi, an analyst at Guotai Haitong Securities. “The market is expected to re-price after these negative factors are digested.”
Meanwhile, a boom in IPOs took its toll by diverting capital from existing stocks and forcing reallocation by fund managers. Hong Kong IPOs surged 84 per cent from a year earlier to US$26.4 billion in the first half, second only to the Nasdaq, which hosted SpaceX’s US$75 billion offering, according to data from LSEG Data & Analytics.