Hong Kong is the worst market this year


Hong Kong is the worst performing stock market not only in Asia but worldwide so far this year.

“The crippled Hang Seng Index is closing the end of the year,” RealMoney’s Alex Frew McMillan recently wrote. “It is amazing to see the market in a major financial center plummet nearly 15% in what is supposed to be a year of recovery, as the US and other markets hit record levels.”

The Hong Kong Stock Exchange’s growing influence of Chinese technology explains part of the underperformance. “Real estate was also taken into account,” said McMillan. “The sector is a mainstay of the local market, but it is being challenged by the sharp decline in developers from mainland China. Likewise, the city’s depressing demise of civil liberties is to blame. “

Overall, the Hang Seng Index is down 14.8% year-to-date, in stark contrast to the double-digit gains in Japan’s Topix Index (up 10.6 %), Indonesia (up 10.8%), Australia (up 11.2%), Thailand (up 12.0%)) and the vastly outperforming markets of Taiwan (+ 18.5%) and India (+ 23.9%).

What’s even stranger is that mainland China’s markets are in the dark – depending on how you look at them. “The Shanghai Composite Index is up 4.1% so far in 2021, and the Shenzhen Composite Index, with greater technology weighting, is up 9.2%. Mainland listed and mainland-focused stocks are doing well, ”added McMillan.

Still, the Hang Seng China Enterprises Index, which is made up exclusively of Chinese companies listed in Hong Kong but not trading inside mainland China, is down 22.2%. This is a stark contrast to Chinese publicly traded companies.

“This is mainly a reflection of growing pressure from Beijing to have Chinese companies ‘come home’ in terms of their listing,” McMillan said.

Didi Global (HAVE I GOT) – Get the DiDi Global Inc. is the unwitting poster child for this category of business.

“The leader of the carpooling market in China was forced to withdraw from the New York Stock Exchange under duress from Beijing,” added McMillan. He was banned from signing new clients after its IPO on June 30, leaving his shares now 55.3% below the listing price. He said earlier this month he would quit the NYSE and would attempt to register in Hong Kong, as I explained at the time. ”

Meanwhile, the Hong Kong market remains in limbo, although better news may be on the horizon.

“Hong Kong is expected to rebound once the penalties imposed by Beijing on Big Techs are fixed and the US listing issue can be resolved,” McMillan said. “If and when that happens, there could be a variation in the range of 20% to 30% – the underperformance of the Hong Kong market this year – but this is a regulatory issue, not of a problem with fundamentals. “

“A policy change could be announced overnight in Beijing or Washington – or not,” he added.

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