Hang Seng Index retreats after attempt to erase stock losses triggered by Covid-19, Wuhan lockdown

Hang Seng Index retreated in late pullback despite record inflows from mainland China funds via Stock Connect programme

Shanghai Composite Index has chalked up almost 4 per cent gain in the new year for its best start since 2008

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A bull sculpture located outside a retail and wholesale clothing mall in Beijing. Stocks in mainland China and Hong Kong retreated after a powerful start to the new year. Photo: AP

Published: 10:52am, 13 Jan 2021Updated: 5:30pm, 13 Jan 2021

Hong Kong stocks briefly recouped all the losses since China locked down Wuhan last year that precipitated one of the biggest global financial market meltdowns, as appealing valuations and a raft of technology stock listings powered the world’s fourth-largest equity market.

The Hang Seng Index climbed as much as 0.5 per cent to 28,414.5, before retreating on Wednesday. A close above 28,341.04 level would have erased all the losses since January 22, a day before China erected barriers around Wuhan, the capital of Hubei province and the epicentre of Covid-19 outbreak, to fight the outbreak.

The gauge slipped 0.2 per cent to 28,235.60 at the close, trimming the advance this year to 3.7 per cent. That still puts the market on its best start to a year since an almost 5 per cent rally over the same period in 2018, according Bloomberg data.

Stocks have rallied globally on the back of unprecedented monetary and fiscal stimulus even though most of the major economies are still grappling with a slump triggered by pandemic, stoking concerns prices have surged ahead of fundamentals. Hong Kong’s gross domestic product probably shrank a record 6.1 per cent in 2020, according to an official estimate. Financial Secretary Paul Chan Mo-po has said that the city could exit from the slump this year.

“The global economy faces numerous economic headwinds due to the omnipresent Covid-19 and its new mutations,” said Stephen Innes, a strategist at Axicorp.

The Hang Seng Index has risen by about 30 per cent from the post-Covid depth of 21,696 in late March 2020. Still, local stocks are a laggard among the world’s major markets amid the city’s struggle with the viral outbreak and domestic political unrest. Members in the Hang Seng Index trade at 12.7 times estimated earnings, compared with 23.1 for the S&P 500 Index and 14 for the Shanghai Composite Index.

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