Hong Kong – The Hang Seng China Enterprises Index (HSCEI), a key stock index representing Chinese companies listed on the Hong Kong Stock Exchange, has entered bear market territory as concerns mount over the Chinese economy’s slowdown and escalating disputes between China and the United States.
Early in the trading day, the HSCEI index experienced a decline of 0.7%. This marks the fifth consecutive day of losses, with the index plummeting 20% since January 27. Among the Hong Kong-listed Chinese companies, shares of Meituan and Tencent suffered the most significant drops.
Investors have grown increasingly anxious about the outlook for the Chinese economy, especially after the release of data showing that China’s industrial output only grew by 5.6% in April, falling short of analysts’ expectations of a 10.9% increase. Similarly, retail sales in April rose by 18.4%, well below the projected 21% surge predicted by analysts. These weaker-than-expected figures indicate a deteriorating economic outlook for China in the second half of the year, reflecting a sluggish recovery from the COVID-19 pandemic.
Moreover, the ongoing dispute between China and the United States is further dampening the investment climate. Recently, China’s cyberspace regulator (CAC) imposed a ban on the sale of chips by American chipmaker Micron Technology. In response, members of the US Congress have urged the Commerce Department to retaliate by suspending sales of chips from Chinese chipmaker Changxin Memory Technologies (CXMT).
The intensifying trade tensions between the world’s two largest economies have created additional uncertainties for investors and further shaken market confidence. The repercussions of this dispute have the potential to disrupt supply chains, impact business operations, and hinder economic growth in both countries.
The combination of concerns over the Chinese economy’s performance and the escalating China-U.S. dispute has triggered a significant decline in Chinese company stocks. The stock market downturn raises questions about the broader stability of the Chinese market and highlights the growing unease among investors.