Market woes continue into 2019 as China, Hong Kong stocks kick off new year with losses amid fresh indications of slowdown
- Shanghai Composite Index ends Wednesday 1.15 per cent lower, while the Hang Seng Index declines by 2.77 per cent
- Two gauges show manufacturing has contracted in China
The stock markets in mainland China and Hong Kong kicked off 2019 with losses, after two gauges indicated manufacturing had contracted in China, the world’s second-largest economy, and added to concerns about a slowdown.
On the mainland, the benchmark Shanghai Composite Index dropped 1.15 per cent, or 28.61 points, to 2,465.29 at the close on Wednesday, its lowest since November 7, 2014. In Hong Kong, the benchmark Hang Seng Index, which is packed with mainland Chinese companies, declined by 2.77 per cent, or 715.35 points, to 25,130.35.
What should traders of Hong Kong, China stocks expect after a year of ‘heaven to hell’?
Equity gauges elsewhere in Asia also fell – South Korea’s Kospi and Australia’s S&P/ASX 200 Index shed 1.5 per cent and 0.6 per cent, respectively. Taiwan’s Taiex index lost 1.78 per cent after Chinese President Xi Jinping said in a speech in Beijing that the island must be united with mainland China. Japan’s markets were closed for a holiday.
“The entire market is pessimistic about growth prospects and nothing can reverse such a mood on the policy front,” said Wu Kan, an investment manager at Soochow Securities in Shanghai. “The woes aren’t going to end soon.”
The Shanghai Composite Index ended 2018 with an overall decline of 25 per cent, making it the world’s worst-performing stock benchmark. Meanwhile, the Hang Seng Index fell by 14 per cent for its worst performance in seven years. Many traders had been hoping the new year would mark a turning point, but a snapshot of preliminary economic data has dashed such optimism for now.
China’s official purchasing managers’ index of the manufacturing sector dropped to 49.4 in December, from 50 in November, according to a National Bureau of Statistics survey on Monday. A reading below 50 indicates contraction and December’s drop is the first to go below the line since July 2016.
A private gauge by Caixin/Markit released on Wednesday, that focuses on smaller industrial companies, also slipped to 49.7 from 50.2 in November, in its first contraction in 19 months. Also, economic growth in China may have slowed to 6.4 per cent in the fourth quarter from 6.5 per cent for the previous three-month period, according to Bloomberg.