Date
21 July 2019
An across-the-board decline is quite rare and occurred only 103 times in more than 6,000 trading days over the past 20 years. Photo: Reuters
An across-the-board decline is quite rare and occurred only 103 times in more than 6,000 trading days over the past 20 years. Photo: Reuters

HK equities outlook mixed after across-the-board decline

The Hang Seng Index had been hovering around 30,000 points for most of April, until US President Donald Trump tweeted early morning on Monday that the United States would increase tariffs to 25 percent on US$200 billion worth of Chinese goods from May 10.

The news immediately plunged the Hang Seng Index by over 1,000 points.

About 92 percent of the stocks fell on Monday, the first time over 90 percent of listed counters fell since October 11 last year.

In fact, such an across-the-board decline is quite rare and occurred only 103 times in more than 6,000 trading days over the past 20 years.

Historical data suggests this sort of broad decline could be one-off, but it could also happen frequently within a short period.

Usually, when it occurs more than three times within 20 trading days, that means the market is going through panic-selling, due to some sort of financial crisis, like what happened during the Asian financial crisis in 1997, the global financial crisis in 2008, and the European debt crisis in 2011.

This time, revived concerns about the US-China trade conflict triggered the sell-off. If the US and China are able to reach a deal this week, the Hang Seng Index is likely to stage a quick rebound.

But if the US-China trade talks break down, the Hong Kong market might see more of such all-embracing declines, with the index testing 27,200 or much lower.

The full article appeared in the Hong Kong Economic Journal on May 9

Translation by Julie Zhu

[Chinese version 中文版]

RT/CG

Hong Kong Economic Journal chief economist and strategist

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