Year of the Dragon bodes well for Hong Kong’s ailing stocks as rate cuts, improving Chinese economy bring hope, officials say
- Since its inception, the Hang Seng Index has enjoyed positive returns every time the propitious Year of the Dragon has rolled around
- ‘When others say that we are headed for the bottom, we always rebound and hit new highs,’ says HKEX chair Laura Cha
“In addition, the mainland [Chinese] economy is stable and improving,” he said. “These factors will bring a positive atmosphere to investment sentiment and the asset market.”
The last Year of the Dragon, in 2012, saw a 15 per cent gain, according to Bloomberg data, a year highlighted by policy easing by global central banks. Similar factors may spur the local market this year too, Chan added.
“Various factors have also made us cautiously optimistic about the Year of the Dragon,” said Chan. “The most important thing is to work with everyone to think of more solutions, innovate and find good development opportunities in the future.”
The market could certainly do with a dose of good fortune. The Year of the Rabbit, which ended on February 9, was a miserable one for local equities as the Hang Seng Index slumped by a record 29 per cent.
“The market will hopefully see a floor in negative sentiment, but the degree of optimism still hinges on how much the fragile confidence can improve,” said Gary Ng, a senior economist at Natixis Hong Kong. The Federal Reserve rate decision in March, as well as the two sessions – China’s annual meetings of the legislature and political advisory body – will be important events to note, he added.
China intervenes in market as regulator steps up scrutiny of stock rout
Chinese authorities have had to intervene in the market, via verbal support and state fund buying, to shore up financial markets at home after a rout that erased more than US$1 trillion of value in Hong Kong, Shanghai and Shenzhen over the past three years. The Hang Seng Index fell about 14 per cent in 2023, capping an unprecedented four-year losing streak.
Market pundits, including the American economist Stephen Roach, had said Hong Kong’s best days were now over. Index provider MSCI will remove scores of Chinese stocks from its Global Standard indices and three from the MSCI Hong Kong Index, after its February review.
“When others say that we are headed for the bottom, we always rebound and hit new highs,” she said. “Every time [Hong Kong] has proved its own strength and resilience.” The city’s many advantages, including rule of law and market transparency, will support recovery and restore investor confidence, she added.
Despite the difficulties presented by the wider economic environment, Hong Kong’s financial markets continued to demonstrate resilience, with derivatives, fixed income, and ETF trading volumes reaching record highs, said Aguzin. Many opportunities abound, he said.
“As China continues to grow, [and] as Asia represents more of the world, this part of the world will need places like Hong Kong to provide that access to opportunities,” said Aguzin.