The market plunged last Friday (2nd), how will the Hong Kong stock market perform today (5th) or this week? In my view: U.S. data contradicts, hurting Hong Kong stocks. How so?
How did Hong Kong stocks fall last Friday? Let's review:
On October 2nd, the three major indices in Hong Kong opened low and continued to decline. The Hang Seng Index closed down 2.6% at 23,972 points, the Hang Seng Tech Index dropped 2.3%, and the H-share Index fell 2.3%.
Technology and internet stocks broadly declined. Physical AI concepts performed weakly throughout the day. Local Hong Kong banking stocks collectively dropped, as did mainland property stocks. Gaming, aviation, and large financial sectors led the declines; optical communication concepts showed partial strength.
Specifically:
Large tech stocks broadly declined, with Xiaomi (01810) down nearly 4%, NetEase (09999) and Baidu (09888) down over 3%, and Tencent (00700), Meituan (03690), and Alibaba (09988) all down over 2%.
Mainland property stocks continued to slide, with Logan Holdings (00884) plunging over 17%, Sino-Ocean Group (03377) down nearly 9%, Country Garden (02007) and Agile Property (03383) down over 6%, and Sunac China (01918) down over 4%.
Hong Kong gaming stocks fell across the board, with Suncity Group (00880) down over 6%, Melco International (00220), Galaxy Entertainment (00027), and MGM China (02282) down over 4%, Wynn Macau (01128) and Sands China (01928) down over 3%. On the news front, Macau's Gaming Inspection and Coordination Bureau reported that Macau's gaming revenue in September was MOP 18.06 billion, down 1.2% year-on-year, marking the fourth consecutive month of decline, worse than the market expectation of a 2.2% increase, and down 17.5% month-on-month. For the first nine months of the year, gaming revenue reached MOP 187.12 billion, up 3.2% year-on-year.
Aviation stocks fell across the board, with Meilan Airport (00357) down over 10%, China Eastern Airlines (00670), Beijing Capital International Airport (00694) down over 5%, Air China (00753) down over 4%, China Southern Airlines (01055) down over 3%, and Cathay Pacific (00293) down nearly 2%.
Huan Chuang Technology (06802) plunged 47.49% on its second trading day. Huan Chuang Technology only listed on the Hong Kong Stock Exchange (00388) on September 30, closing up 265.68% on its first trading day at HK$215.2 per share.
Memory-related concept stocks strengthened, with XL Two Southern Hynix (07709) up over 5%, XL Two Samsung (07747) up over 4%, and Zhaoyi Innovation, Montage Technology, and Jiangbolong all closing higher.
In short, everything fell. But which declines were justified, and which were innocent?
*Tech stocks fell:
Because this sector has always been volatile, if it stabilizes within three to five days, it can still sustain its previous upward trend, as technology will still dominate in the coming years. Individual tech stocks have their own support levels. Most importantly, don't over-leverage with debt.
*Banking stocks fell
Unclear, so unless there's a global financial crisis, this should now be seen as a correction.
*Mainland property stocks fell
Although supported by regulators, mainland property stocks are still recovering from a long illness and are susceptible to setbacks, so fluctuations are inevitable.
*Gaming stocks fell
Justified. Although Macau's gaming revenue rose in the first nine months of the year, it has declined for the past four months. The upcoming October Golden Week holiday will be key to recovery.
*Aviation stocks fell
Middle East turmoil, rising oil prices, cargo first.
*Memory-related concept stocks strengthened
Absolutely inevitable. What AI device doesn't need memory chips? It's said that memory chip supply and demand won't balance until 2027 or even 2028.
Looking at last Friday's Hong Kong stock gainers and losers only confirms one point: market demand is king. Therefore, when picking stocks afterward, just ask: where are the customers, what do customers want!
*3 Reasons for the Hong Kong Market Drop*
Now we know what fell, but why the big drop last Friday? The real reason is unknown; we can only speculate.
1. Tokyo's consumer price index rose 2.7% year-on-year in September, the highest in 10 months, strengthening expectations of further rate hikes by the Bank of Japan.
Japan's rate hikes are bad news for global finance because the yen carry trade becomes unviable. For nearly three decades, due to the yen's negative interest rates, global speculators borrowed yen (with no interest cost) to buy global assets (with interest income). This no-cost business was done by every major speculator. In recent months, as borrowing yen started incurring interest, speculators either stopped borrowing yen to buy foreign assets after their loan periods ended, thus ending the carry trade, meaning the major tap supplying capital to global assets was turned off. More critically, speculators who had taken large leveraged positions faced margin calls as yen interest rates rose, forcing them to cut losses and close positions.
Previously, many yen carry trades involved borrowing yen to buy U.S. bonds. Hence, recently, many have been selling U.S. bonds—not necessarily central banks, but numerous speculators doing the same—pushing U.S. bond yields above 5%, (bond prices move inversely to yields). Higher U.S. bond yields also pull up global interest rates. With higher bond yields, stock prices are pressured on a risk-return basis until stock yields match bond yields.
2. During the National Day holiday, regulators took a break, and northbound funds paused, leaving Hong Kong stocks—the proverbial 'weakling'—without support, causing them to plummet at the first sign of selling.
3. Last Friday's selling was due to global markets being spooked by the strong U.S. employment data in August, expecting similarly strong data in September, leading to another Fed rate hike in October. Thus, global stock markets fell preemptively due to this 'anticipated fear.'
However, I pointed out in an article on September 8th titled 'Negotiation' that the August employment data was inflated, actually weak rather than strong, but who would believe that?
Thus, muddling along until last Friday, the September job growth came in at a mere 29,000, a weak figure. The result was:
*The expectation of a Fed rate hike in October dropped from high probability to low probability,
*U.S. stocks, gold, and oil all rebounded in a V-shape, while the U.S. dollar and yields fell.
This contradiction between August (162,000 jobs added) and September (only 29,000 jobs added) U.S. employment data caused Hong Kong stocks to be unfairly hammered last Friday before the U.S. employment data was released.
Why say unfairly? Sigh! A few hours before the U.S. employment data was released, U.S. futures were already rising! Don't complain, don't get angry. The financial power of big players is never spent solely on investment markets; spending on obtaining accurate, useful information is what protects their investments. Unfortunately, the employment data was released at 8 PM Hong Kong time last Friday, and the rise in U.S. futures was only revealed after the Hong Kong market closed. When exactly the positioning occurred is unknown, but the fact remains: your Hong Kong stocks were sold off, and by the time you knew, it was already done. Done is done. Don't beat your chest seeing the U.S. market's V-shaped rebound last Friday, feeling innocent and sold out.
Morgan Stanley analysts believe Hong Kong can avoid the broad asset price declines seen from 2022 to 2023, a comforting thought worth considering.
On October 2nd, Morgan Stanley analysts stated that despite the Fed's renewed tightening cycle, Hong Kong banks' aggregate balance at the HKMA nearing record lows, and weak mainland demand, Hong Kong is unlikely to repeat the broad asset price declines and economic recession caused by U.S. interest rate hikes and capital outflows from 2022 to 2023.
Morgan Stanley expects Hong Kong's 1-month interbank lending rate to rise only about 50 basis points to 3.5% by March next year, with the prime rate increasing only 12.5 basis points. The bank explained that the Hong Kong dollar loan-to-deposit ratio has dropped to a 19-year low of 71%, helping reduce banks' wholesale funding pressure, thereby limiting the transmission of Fed rate hikes to local borrowing costs.
Morgan Stanley noted that Hong Kong's current situation is better than before, with stronger bank financing capabilities, continuous talent inflow, and improved external balances, all buffering the smaller impact of Fed rate hikes.
The bank expects Hong Kong property prices to stagnate in the fourth quarter of this year and rise 5% next year, driven mainly by talent inflow, limited supply, and clearer prospects for peak mortgage costs. Once the Fed's tightening ends, delayed homebuyers should return to the market.
The bank believes Hong Kong's economy will experience only minor fluctuations rather than stagnation, revising its GDP growth forecasts for 2026 and 2027 to 4.3% and 3.5% respectively.
Regarding stocks, Morgan Stanley predicts short-term pressure on Hong Kong stocks but no broad de-risking similar to 2022-2023.
The bank believes China's advantages in artificial intelligence, advanced manufacturing, and green transformation will continue to attract investors, supporting moderate medium-term gains. In sector allocation, it favors financial stocks over real estate, and landlords over developers; it prefers HSBC (00005) and Standard Chartered (02888) among bank stocks, and Swire Properties (01972) and Hongkong Land among property stocks.
Will this placebo work? You decide. The real life-saving pill lies in analyzing September's employment data and the upcoming U.S. CPI data. More to follow. Senior Investor, Shek King-chuen
(Investing involves risk; each investor has different risk tolerance. Independent thinking is essential. The author may trade based on market conditions.)
*Articles signed and/or unsigned published in Economic Times reflect the authors' personal opinions and do not represent the stance of Economic Times. Economic Times serves as a platform for free expression.
How did Hong Kong stocks fall last Friday? Let's review:
On October 2nd, the three major indices in Hong Kong opened low and continued to decline. The Hang Seng Index closed down 2.6% at 23,972 points, the Hang Seng Tech Index dropped 2.3%, and the H-share Index fell 2.3%.
Technology and internet stocks broadly declined. Physical AI concepts performed weakly throughout the day. Local Hong Kong banking stocks collectively dropped, as did mainland property stocks. Gaming, aviation, and large financial sectors led the declines; optical communication concepts showed partial strength.
Specifically:
Large tech stocks broadly declined, with Xiaomi (01810) down nearly 4%, NetEase (09999) and Baidu (09888) down over 3%, and Tencent (00700), Meituan (03690), and Alibaba (09988) all down over 2%.
Mainland property stocks continued to slide, with Logan Holdings (00884) plunging over 17%, Sino-Ocean Group (03377) down nearly 9%, Country Garden (02007) and Agile Property (03383) down over 6%, and Sunac China (01918) down over 4%.
Hong Kong gaming stocks fell across the board, with Suncity Group (00880) down over 6%, Melco International (00220), Galaxy Entertainment (00027), and MGM China (02282) down over 4%, Wynn Macau (01128) and Sands China (01928) down over 3%. On the news front, Macau's Gaming Inspection and Coordination Bureau reported that Macau's gaming revenue in September was MOP 18.06 billion, down 1.2% year-on-year, marking the fourth consecutive month of decline, worse than the market expectation of a 2.2% increase, and down 17.5% month-on-month. For the first nine months of the year, gaming revenue reached MOP 187.12 billion, up 3.2% year-on-year.
Aviation stocks fell across the board, with Meilan Airport (00357) down over 10%, China Eastern Airlines (00670), Beijing Capital International Airport (00694) down over 5%, Air China (00753) down over 4%, China Southern Airlines (01055) down over 3%, and Cathay Pacific (00293) down nearly 2%.
Huan Chuang Technology (06802) plunged 47.49% on its second trading day. Huan Chuang Technology only listed on the Hong Kong Stock Exchange (00388) on September 30, closing up 265.68% on its first trading day at HK$215.2 per share.
Memory-related concept stocks strengthened, with XL Two Southern Hynix (07709) up over 5%, XL Two Samsung (07747) up over 4%, and Zhaoyi Innovation, Montage Technology, and Jiangbolong all closing higher.
In short, everything fell. But which declines were justified, and which were innocent?
*Tech stocks fell:
Because this sector has always been volatile, if it stabilizes within three to five days, it can still sustain its previous upward trend, as technology will still dominate in the coming years. Individual tech stocks have their own support levels. Most importantly, don't over-leverage with debt.
*Banking stocks fell
Unclear, so unless there's a global financial crisis, this should now be seen as a correction.
*Mainland property stocks fell
Although supported by regulators, mainland property stocks are still recovering from a long illness and are susceptible to setbacks, so fluctuations are inevitable.
*Gaming stocks fell
Justified. Although Macau's gaming revenue rose in the first nine months of the year, it has declined for the past four months. The upcoming October Golden Week holiday will be key to recovery.
*Aviation stocks fell
Middle East turmoil, rising oil prices, cargo first.
*Memory-related concept stocks strengthened
Absolutely inevitable. What AI device doesn't need memory chips? It's said that memory chip supply and demand won't balance until 2027 or even 2028.
Looking at last Friday's Hong Kong stock gainers and losers only confirms one point: market demand is king. Therefore, when picking stocks afterward, just ask: where are the customers, what do customers want!
*3 Reasons for the Hong Kong Market Drop*
Now we know what fell, but why the big drop last Friday? The real reason is unknown; we can only speculate.
1. Tokyo's consumer price index rose 2.7% year-on-year in September, the highest in 10 months, strengthening expectations of further rate hikes by the Bank of Japan.
Japan's rate hikes are bad news for global finance because the yen carry trade becomes unviable. For nearly three decades, due to the yen's negative interest rates, global speculators borrowed yen (with no interest cost) to buy global assets (with interest income). This no-cost business was done by every major speculator. In recent months, as borrowing yen started incurring interest, speculators either stopped borrowing yen to buy foreign assets after their loan periods ended, thus ending the carry trade, meaning the major tap supplying capital to global assets was turned off. More critically, speculators who had taken large leveraged positions faced margin calls as yen interest rates rose, forcing them to cut losses and close positions.
Previously, many yen carry trades involved borrowing yen to buy U.S. bonds. Hence, recently, many have been selling U.S. bonds—not necessarily central banks, but numerous speculators doing the same—pushing U.S. bond yields above 5%, (bond prices move inversely to yields). Higher U.S. bond yields also pull up global interest rates. With higher bond yields, stock prices are pressured on a risk-return basis until stock yields match bond yields.
2. During the National Day holiday, regulators took a break, and northbound funds paused, leaving Hong Kong stocks—the proverbial 'weakling'—without support, causing them to plummet at the first sign of selling.
3. Last Friday's selling was due to global markets being spooked by the strong U.S. employment data in August, expecting similarly strong data in September, leading to another Fed rate hike in October. Thus, global stock markets fell preemptively due to this 'anticipated fear.'
However, I pointed out in an article on September 8th titled 'Negotiation' that the August employment data was inflated, actually weak rather than strong, but who would believe that?
Thus, muddling along until last Friday, the September job growth came in at a mere 29,000, a weak figure. The result was:
*The expectation of a Fed rate hike in October dropped from high probability to low probability,
*U.S. stocks, gold, and oil all rebounded in a V-shape, while the U.S. dollar and yields fell.
This contradiction between August (162,000 jobs added) and September (only 29,000 jobs added) U.S. employment data caused Hong Kong stocks to be unfairly hammered last Friday before the U.S. employment data was released.
Why say unfairly? Sigh! A few hours before the U.S. employment data was released, U.S. futures were already rising! Don't complain, don't get angry. The financial power of big players is never spent solely on investment markets; spending on obtaining accurate, useful information is what protects their investments. Unfortunately, the employment data was released at 8 PM Hong Kong time last Friday, and the rise in U.S. futures was only revealed after the Hong Kong market closed. When exactly the positioning occurred is unknown, but the fact remains: your Hong Kong stocks were sold off, and by the time you knew, it was already done. Done is done. Don't beat your chest seeing the U.S. market's V-shaped rebound last Friday, feeling innocent and sold out.
Morgan Stanley analysts believe Hong Kong can avoid the broad asset price declines seen from 2022 to 2023, a comforting thought worth considering.
On October 2nd, Morgan Stanley analysts stated that despite the Fed's renewed tightening cycle, Hong Kong banks' aggregate balance at the HKMA nearing record lows, and weak mainland demand, Hong Kong is unlikely to repeat the broad asset price declines and economic recession caused by U.S. interest rate hikes and capital outflows from 2022 to 2023.
Morgan Stanley expects Hong Kong's 1-month interbank lending rate to rise only about 50 basis points to 3.5% by March next year, with the prime rate increasing only 12.5 basis points. The bank explained that the Hong Kong dollar loan-to-deposit ratio has dropped to a 19-year low of 71%, helping reduce banks' wholesale funding pressure, thereby limiting the transmission of Fed rate hikes to local borrowing costs.
Morgan Stanley noted that Hong Kong's current situation is better than before, with stronger bank financing capabilities, continuous talent inflow, and improved external balances, all buffering the smaller impact of Fed rate hikes.
The bank expects Hong Kong property prices to stagnate in the fourth quarter of this year and rise 5% next year, driven mainly by talent inflow, limited supply, and clearer prospects for peak mortgage costs. Once the Fed's tightening ends, delayed homebuyers should return to the market.
The bank believes Hong Kong's economy will experience only minor fluctuations rather than stagnation, revising its GDP growth forecasts for 2026 and 2027 to 4.3% and 3.5% respectively.
Regarding stocks, Morgan Stanley predicts short-term pressure on Hong Kong stocks but no broad de-risking similar to 2022-2023.
The bank believes China's advantages in artificial intelligence, advanced manufacturing, and green transformation will continue to attract investors, supporting moderate medium-term gains. In sector allocation, it favors financial stocks over real estate, and landlords over developers; it prefers HSBC (00005) and Standard Chartered (02888) among bank stocks, and Swire Properties (01972) and Hongkong Land among property stocks.
Will this placebo work? You decide. The real life-saving pill lies in analyzing September's employment data and the upcoming U.S. CPI data. More to follow. Senior Investor, Shek King-chuen
(Investing involves risk; each investor has different risk tolerance. Independent thinking is essential. The author may trade based on market conditions.)
*Articles signed and/or unsigned published in Economic Times reflect the authors' personal opinions and do not represent the stance of Economic Times. Economic Times serves as a platform for free expression.
