Hong Kong Markets Tumble Amid Global Economic Pressures; U.S. Treasury Yields at 16-Year Highs

Hong Kong Markets Tumble Amid Global Economic Pressures; U.S. Treasury Yields at 16-Year Highs

HONG KONG: In a tumultuous start to the last quarter of 2023, Hong Kong shares experienced a sharp decline on Tuesday, triggered by U.S. Treasury yields reaching a 16-year high, creating significant pressure on global markets.

The Hang Seng Index plummeted by 2.7%, marking its lowest point since November 2022. Similarly, the Hang Seng China Enterprises Index witnessed a 3.2% fall, while the Hang Seng Tech Index recorded a loss of 2.6%.

The preceding day, Hong Kong markets were closed for a public holiday, and Mainland China markets are set to remain closed for the Golden Week holiday throughout the week. The China-Hong Kong Stock Connect program also suspended trading for the duration of the week.

Adding to the economic concerns, a private-sector survey on Sunday revealed that China's factory activity expanded at a slower pace in September. Sluggish external demand is weighing on the outlook, despite an increase in output.

In the face of these challenges, Alibaba has announced plans to list its logistics arm in a Hong Kong IPO.

Hong Kong trading volumes are typically subdued during China’s Golden Week. Analysts attribute this to the holiday period; however, the hawkish stance of the U.S. Federal Reserve, signaling an intention to keep interest rates higher for a more extended period, continues to cast a shadow over the market.

The yield on benchmark 10-year U.S. notes has reached its highest point since 2007, contributing to the overall apprehension in the market.

All major sectors, including technology, property, and banking, reported declines. Notably, Hong Kong's property giant, New World Development, witnessed a substantial 5.3% drop, reaching a near 20-year low due to a decline in net profit and a payout cut.

Steven Leung, the Director of Institutional Sales at UOB Kay Hian in Hong Kong, expressed concern about the week ahead, stating, “It's going to be a tough week if we don't hear some positive news. Leung underscored the market's widespread apprehension, particularly with reference to the United States. interest rates.

Adding to the volatility, China Evergrande resumed trading on Tuesday after announcing that its billionaire founder was under investigation for unspecified crimes. The embattled developer's shares surged more than 40% at the market open, eventually closing 28% higher. Leung cautioned, “Speculators are buying Evergrande, but there’s still a lot of uncertainty in the Chinese property sector.”

Hong Kong-listed mainland property firms also experienced a decline of 3.6%, further contributing to the overall market unease.