Hong Kong Stock Exchange Plummets After Weak Data from Mainland China

The stock markets in Hong Kong have reached a new monthly low after a disappointing inflation report from mainland China heightened concerns about economic cooling risks. Citigroup joined other Wall Street banks in shunning Chinese stocks as weak consumption and bleak corporate earnings estimates dampened optimism. The Hang Seng Index fell by 2 percent to 17,094.38 points by midday trading, marking the largest one-day drop in five weeks. The Tech Index also declined by 2 percent, while the Shanghai Composite Index slipped by 0.9 percent to an eight-month low. Among the e-commerce giants, Alibaba Group lost 1.7 percent to 78.45 HKD, competitor JD.com fell by 2.9 percent to 101.30 HKD, and Tencent dropped by 1.7 percent to 367 HKD. Real estate developers such as Longfor and China Resources Land suffered significant losses of 4.1 percent and 5.1 percent, respectively. Consumer prices in China rose by 0.6 percent in August compared to the previous year, falling short of the market expectation of 0.7 percent. The increase was 0.5 percent in July. Factory prices remained in deflationary territory and fell by 1.8 percent, more than expected. Kevin Liu, Managing Director and Strategist at CICC Research, emphasized that current economic growth remains weak and that high market volatility is expected in the short term due to uncertainty over China’s policy measures. More government reports this week could further exacerbate the negative sentiment. Bloomberg economists expect exports to have increased by 6.6 percent in August, less than the 7 percent growth in July. Imports could have risen by 2.3 percent compared to 7.2 percent in the previous month. Citigroup, along with JPMorgan Chase and Nomura, withdrew their positive assessments of Chinese stocks as weak earnings growth and declining consumer demand weakened investors' risk appetite. The US bank lowered its year-end target for the Hang Seng Index by 3 percent to 19,800 points. Today's setback increased the index's monthly losses to 5 percent, nearly erasing all gains for the year. The weak performance forces global investors to reduce their holdings of Chinese stocks. According to Goldman Sachs, allocations by investment funds and hedge funds have fallen to their lowest level in almost a decade. China Renaissance Holdings, a boutique investment bank, also plummeted by up to 73 percent to 1.98 HKD after trading resumed following a suspension of over a year. This followed delays in publishing annual reports and the arrest of founder Bao Fan. Other significant Asian markets were also under pressure. Japan’s Nikkei 225 lost 1.2 percent, South Korea’s Kospi fell by 0.5 percent, and Australia’s S&P/ASX 200 dropped by 0.5 percent.