Analysis-China holds the key to Hong Kong's shrinking stock market

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Remembering Harley: Graveside memorial service honours homeless Hantsport man’s life | SaltWireHONG KONG - Hong Kong's efforts to revive its shrinking stock market are mere stopgap solutions, as analysts say a reversal in fortunes for Asia's premier financial hub would not be possible without a major improvement in China's economic prospects.

With a market value of around $4.3 trillion, Hong Kong is home to one of the top-ranked stock markets globally just behind those in the United States, Japan, China and Europe. It might spur a"short-lived rebound" in the Hong Kong stock market, he said, but longer-term issues such as the exodus of foreign investors and the tensions between China and the United States would remain an overhang.

"Liquidity is clearly down due to foreign investors reducing exposure to China, since many investors, ourselves included, access China shares from Hong Kong," said Rob Brewis, a portfolio manager at UK-based asset manager Aubrey Capital Management. China's economy has stumbled this year after a brief post-COVID bounce, with growth hurt by a protracted property crisis, elevated debt levels and sluggish demand.The decline in volumes has been dire for Hong Kong's hundreds of small hole-in-the-wall brokerages. Local media reported that a record 47 of the 638 trading participants on the Hong Kong exchange shut shop last year.

“The current trading volume is extremely low, and investors are reluctant to buy because they see no other investors participating. The willingness to invest has reduced sharply," said Cheung.

 

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