Why is the Hong Kong stock market experiencing another significant decline, hitting a ten-month low?
On one hand, there is pressure from the appreciation of the US dollar and the rising yields of US Treasury bonds. On the other hand, the Evergrande crisis continues to worsen, dampening investor sentiment. What's more, with the upcoming short holiday, many investors are choosing to "hold cash" and wait and see.
After the dismal plunge in August, the Hong Kong stock market remained gloomy at the end of September.
On Tuesday, September 26th, the Hang Seng Index opened low and continued to decline, hitting a new low since the end of November last year in the morning session. In the afternoon, it fell more than 2% at one point, while the Hang Seng Tech Index dropped nearly 2%.
Looking at the market, all sectors experienced a decline, with consumer, industrial, and real estate stocks leading the way, and technology stocks falling across the board.
Why is the Hong Kong stock market falling again, and why is it experiencing a significant drop to a ten-month low?
There are two main reasons: 1. The appreciation of the US dollar combined with the rise in US Treasury yields has suppressed the stock market; 2. The Evergrande crisis is still fermenting, further dampening investor sentiment.
After the Federal Reserve meeting last week, the market once again factored in expectations of a rate hike by the Fed and pushed back the timing of possible rate cuts. As a result, US bond yields rose, the US dollar strengthened, and US stocks came under pressure due to higher financing costs, which naturally affected the Hong Kong stock market.
Moreover, Moody's warning about a possible US government shutdown has also weighed on the risk sentiment in the Hong Kong stock market. Moody's stated that although the US government's debt payments will not be affected, and a brief government shutdown is unlikely to disrupt the economy, it will highlight the fragility of the US in terms of its institutions and governance compared to other AAA-rated sovereign countries covered by the agency in recent years.
On the other hand, just yesterday, Evergrande's subsidiary, Evergrande Real Estate, announced that it had failed to make the payment of 4 billion yuan in principal and interest on bonds due on Monday. This has further clouded the already pessimistic real estate market, and Evergrande's Hong Kong stock price fell by 7% at one point.
Another point worth noting is that this Friday marks the start of a one-week holiday for the Mid-Autumn Festival and National Day in China. Many investors have chosen to hold cash instead of stocks during the holiday, hoping to minimize the risks of the market being closed during the festive period.
According to China Everbright Securities' analysis based on historical experience, the Hong Kong stock market tends to perform poorly before the National Day holiday, usually showing better performance after the market opens on October 3rd, but the upward momentum slows down after October 7th.