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

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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 ...

HONG 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.

But it compares poorly on turnover, with a daily average of $11.3 billion between January and June compared with $261 billion for Nasdaq, $27.9 billion for Japan and $77.9 billion for China's Shenzhen exchange. New share offerings in Hong Kong have fizzled. The HSI hit a 22,700.85 peak in late January and is currently around 17,000. Daily turnover has fallen below HK$80 billion on numerous occasions since the second quarter, halving from an average of HK$160 billion in 2021."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.

Chinese firms listed in Hong Kong, such as tech giants Tencent and Alibaba, comprise the bulk of the turnover on the Hong Kong exchange, leaving Hong Kong hostage to China's fortunes. “Market sentiment is even worse than 2008,” said Alex Wong, a partner of Alex KY Wong Asset Management Company, referring to the Global Financial Crisis.

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