Hang Seng Index: Current state of affairs

The Hang Seng Index continues to seesaw amidst ongoing US-China trade tensions, internal instability, and Alibaba’s IPO.

Hong Kong benchmark stock index Hang Seng Index (HSI) has been experiencing a roller coaster ride of sorts since May this year.

Prior to mass protests around the Extradition Bill in May, the index was trading at a year-to-date high of 30,081.55 on Friday 3 May. But as days of picketing turned into months, the HSI began to nosedive, hitting a seven-month low of 25,281.30 on August 13.

The Hong Kong economy also reflected this negative market sentiment, sinking into its worst recession in a decade for the third quarter of 2019, with GDP shrinking 3.2% during the three months ending September.

Erratic US-China trade relations throughout the year have also impacted trading activity.

In early-November, a planned tariff roll-back on goods by both the US and Chinese governments saw stocks rally 4.42% to a three-month peak of 27,847.23 on Thursday 7 November.

Plans for such a deal soon stalled, as both governments started going back and forth in their policies. The index was hit by the lack of clarity, as evident by prices plunging back down to 26,323.69 only one week later.

Alibaba’s listing on the Hong Kong Stock Exchange on 26 November, a big event for the Hang Seng Index that was expected to breathe some much-needed life into the ailing market, saw the stock line trade 0.3% below the previous close of 26,993.04.

Stock prices have since edged upwards to a range of 26,954.00 at the close of Wednesday 27 November.

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‘Hong Kong market is working’: analyst

Alibaba’s IPO did not quite lift the index, but analysts say things still bode well for the HSI.

As Andrew Sullivan, a director at Pearl Bridge Partners, told Bloomberg Television: ‘Alibaba will be the leading light for bringing more companies in. You may see some new money being allocated.

‘Coming at this time just after the protests, it underlines that the Hong Kong market is working regardless of what you see outside on the streets,’ he added.

This all comes on top of the fact that since prices began to tumble in June, mainland Chinese investors have purchased some US$20 billion worth of Hong Kong equities, according to The Wall Street Journal.

On Tuesday 26 November, US President Donald Trump revealed that both US and China are in the “final throes” of an agreement on phase one of a trade deal, barring a tariff roll-back. Speaking to reporters, Mr Trump said: ‘It’s going very well, but at the same time we want to see it go well in Hong Kong.’

A day later, the US President passed a bill called the Hong Kong Human Rights & Democracy Act, which seeks to conduct an annual review of the city’s special trading status and its political autonomy.

The next day, the HSI lost 0.7% in early trade to reach a low of 26,763.63 for the week.

All eyes are now turned toward December 15, when the next round of US tariffs will officially take effect. If no deal is made then, US duties on Chinese goods will go ahead as planned.

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