Hang Seng Index

Hong Kong stocks down a wretched 14 per cent in 2018 – the worst performance in 7 years

  • About US$575 billion in market capitalisation was wiped out in 2018
  • Stocks rose on last day of trading; markets reopen on Wednesday
PUBLISHED : Monday, 31 December, 2018, 11:16am
UPDATED : Monday, 31 December, 2018, 10:52pm

Hong Kong stocks dropped 13.6 per cent during 2018 – the worst performance in seven years – despite surging on the last trading day on the back of signals of trade talk progress.

About HK$4.5 trillion (US$575 billion) in market capitalisation was wiped out since the beginning of the year, as worries over the US-China trade war, China’s slowing economy and rising interests rates pushed the market down from an all-time high in January.

Only 12 out of the 50 Hang Seng Index constituents recorded positive returns this year, while the worst performing index member – smartphone audio components maker AAC Technologies, which supplies Apple and Huawei – plummeted by as much as 67 per cent.

What should traders of Hong Kong, China stocks expect after a year of ‘heaven to hell’?

Defensive tactics made the utilities the only subindex still in green territory, with a modest 4 per cent gain, while the commerce and industry subindex recorded a 19 per cent loss.

“The market has been troubled by the US-China trade war and many other uncertainties this year,” said Stanley Chan, director of research at Emperor Securities.

Such uncertain factors include tightening liquidity due to US interest rate hikes, China’s economy losing steam in the second half of the year, as well as worries over a synchronised global economic slowdown in the next year, Chan said.

But market sentiment on the last trading day was boosted by a rare phone call between Xi Jinping and Donald Trump on Saturday, which pointed to improvements in the relation between the world’s two largest economies caught in a months-long trade war

The Hang Seng Index rose 1.3 per cent, or 341.5, to 25,845.7 to close at Monday noon. Trading will resume on Wednesday after the New Year’s Day holiday.

The mainland Chinese markets are closed Monday and Tuesday for the New Year’s holiday and will resume trading on Wednesday, too. The Shanghai Composite Index closed on Friday down 25 per cent for the year, making it the worst performing major market in the world.

Shanghai’s stock index ends 2018 as the world’s biggest loser as trade war, slowing Chinese economy weigh on confidence

“Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute,” Trump tweeted Saturday night.

Xi and Trump expressed their willingness to push forward agreements achieved during the G20 meeting earlier in December, the state-run Xinhua News Agency reported.

VC Asset Management managing director Louis Tse Ming-kwong was one of the lucky traders in Hong Kong in 2018. He took profits and got out of the market in fall.

“The only thing we can say about this year is that it’s been a very volatile market,” Tse said.

The worst reading of China’s manufacturing sector in over two years released on Monday did not dim the market’s hopes.

China’s economy slows further as manufacturing contracts for first time in two and a half years

Factory activities contracted in December for the first time since July 2016 as the official Purchasing Managers’ Index fell to 49.4, while non-manufacturing PMI rose to 53.8 from 53.4 in November.

Hang Seng Index heavyweight Tencent Holdings rose 1.3 per cent to HK$314, after China’s regulators lifted a freeze on new games and approved 80 titles on Saturday.

Even though none of the titles was from Tencent, the Chinese gaming and internet giant, the move signalled a softened government attitude on online gaming. Shares of Tencent has slumped by a third since an historical high in January, partially due to the regulator’s new game approval freeze.