Hong Kong’s stock market benchmark has experienced a significant decline, falling more than 9% as traders reacted to recent sharp gains by selling off shares. The Hang Seng Index closed down 9.4% at 20,926.79, with technology and China-related stocks leading the downward trend.
This drop follows a week of strong performance in Hong Kong shares while mainland China markets were closed for a weeklong holiday. The previous gains were largely driven by optimistic announcements from Beijing regarding increased support for the economy and financial markets.
On Tuesday, the Shanghai Composite Index initially surged by 3.1% to reach 3,438.16 as Chinese markets reopened after the holiday. However, this rise was tempered as details of the economic stimulus plans unveiled by Chinese officials failed to meet investor expectations. The initial surge in Shanghai saw gains of up to 10%, but these were quickly curtailed as traders reacted to a briefing from China’s main economic planning agency that highlighted various policies intended to tackle persistent issues, particularly the struggling property market.
Stephen Innes, managing partner at SPI Asset Management, noted, “China’s markets rally has hit a wall, leaving investors deflated. The reopening surge from the week-long holiday barely had time to gather steam before fizzling out, and now the once-thrilled bulls are licking their wounds.”
In the broader Asian market, declines were prevalent. Tokyo’s Nikkei 225 index fell by 1.3% to 38,842.75, while the dollar weakened against the yen, trading at 147.89 Japanese yen, down from 148.18 yen. A weaker yen typically supports higher share prices.
In Seoul, the Kospi index dropped 0.4% to 2,599.96, and Australia’s S&P/ASX 200 decreased by 0.4% to 8,176.90.
Meanwhile, in the U.S., stocks faced a downturn on Monday as Treasury yields reached their highest levels since summer, coupled with rising oil prices. The S&P 500 slid 1% to 5,695.94, remaining close to its all-time high set the previous week. The Dow Jones Industrial Average decreased by 0.9% to 41,954.24, also coming down from a record, while the Nasdaq composite fell by 1.2% to 17,923.90.
The recent stall in U.S. stocks follows a record rally driven by hopes that interest rates are finally beginning to decline. The Federal Reserve has shifted its focus to sustaining economic growth rather than solely combating high inflation. A robust report on U.S. job growth released last Friday further fueled optimism about the economy, raising expectations that the Fed could achieve a smooth transition for economic stability.
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