Hong Kong’s stock market needs more than just verbal assurances for a sustainable rally, say analysts
- Analysts are concerned that China may not be able to achieve 5.5 per cent GDP target
- Geopolitical risks and delisting fears of US-listed Chinese stocks weigh on investor anxiety
With the phenomenal two-day rally in Hong Kong stocks fizzling out on Friday, analysts said the market needs more than just verbal boosts for the rout to end.
A rare assurance by Chinese Vice-Premier Liu He on Wednesday that Beijing would “maintain stable operation of the capital market” pushed up stocks by the most since 2008, helping blue-chip companies in Hong Kong to recover US$468 billion of market value in two days. But for a lasting recovery, investors said several challenges stand in the way.
The biggest worry is the weakness in China’s economy, said William Fong, head of Hong Kong and China equities at global investment firm Barings. “There is concern about whether China can really achieve its 5.5 per cent GDP target, given high commodity costs and shortages in shipping and components,” he said.
China set an economic growth target of around 5.5 per cent for this year, in its annual parliamentary meeting earlier this month, but many economists expect lower growth. Goldman Sachs has forecast 4.5 per cent growth this year.
Geopolitical risks and delisting fears of US-listed Chinese stocks are weighing on investor anxiety, adding to concerns about China’s economic growth amid a flare-up in Covid-19 cases on the mainland, which last week surged to their highest level since 2020.
Similar assurances by Chinese policymakers in the past have “put a floor on the market rather than set off a sustainable rally,” said Rory Green, chief China economist at research firm TS Lombard.