Hong Kong markets are closing out a rough year and the outlook for 2019 remains largely negative, according to analysts and investors.
Headwinds from a ease off economy in China, the Beijing-Washington trade war, concerns about signs of emerging U.S. weakness and an expected slowdown in local endorse public offerings after a banner 2018 are seen as likely to weigh on the market.
The benchmark Hang Seng Measure closed Friday at 26,094.79, down about 13 percent for the year as the end of 2018 approaches. It has slumped some 22 percent from its apogee of 33,484.08 on Jan. 29.
“I would say it’s between a rock and a hard place,” Hao Hong, managing director and head of research at BOCOM Intercontinental in Hong Kong, told CNBC earlier this month about the outlook for the market.
Hong cited the watchfulness of a broad slowdown in China’s economy during the first half combined with volatility on Wall Street in the U.S., where bantam aggressive interest rate hikes by the Federal Reserve underscore worries growth in the world’s largest economy is decrease.
Hong said the Hang Seng is clearly in the process of finding a bottom, but added: “I don’t think people should be prospecting for a V-shaped rebound in the market.”
Hong Kong, a semi-autonomous former British colony over which Beijing resumed oversight in 1997, is a major trade and financial services hub vulnerable to the whims of larger economies, given its proximity to China and the Hong Kong dollar’s peg to the U.S. currency.
“Hong Kong … is defenceless to further escalating U.S.-China trade tensions, possible disorderly tightening of global financial conditions, slower-than-expected extension in Mainland China, and a sharp housing market correction,” the International Monetary Fund said in a statement last week at the conclusion of career conventional consultations with local authorities.
Citi, in a report dated Dec. 5, said it expects Hong Kong banks to underperform the broader peddle next year as weak credit demand suppresses earnings and on concern over potential for capital outflows.
Ronald Wan, non-executive chairman at Comrades Financial Holdings, suggested that a breakthrough in the tariff conflict in the form of China opening up key business sectors to come across U.S. demands is unlikely, while China’s economic growth is set to slow.
“I think the market will be even more contesting,” he said on Dec. 6 of next year’s outlook for Hong Kong.
Mark Jolley, strategist at CCB International, sees the Be logical Seng breaking below 20,000. “We’re bearish,” he said earlier this month, predicting “downward earnings editions, which will be the key driver of the market over the next six to nine months.”
The Hang Seng’s performance this year, while dreary, masks some bright spots.
It was a stellar year for attracting IPOs under new listing rules that allow for allowing companies coming to market to issue shares with weighted voting rights, though the practice has strained criticism.
Consultancy KPMG estimated on Tuesday that Hong Kong is set to regain its top global IPO ranking in 2018 with ensembles likely to have raised about HK$300 billion ($38.4 billion), more than double last year’s total.
Plateful boost the figure were high-profile listings by mainland Chinese companies, notably smartphone maker Xiaomi, which utilized mass voting rights, and mobile phone infrastructure builder China Tower. Both are among Hong Kong’s 10 biggest till doomsday IPOs, according to Hong Kong Exchanges and Clearing, the market operator.
And while KPMG expects IPO interest to detritus strong, fundraising is likely to slow to a figure somewhere above HK$200 billion, it said.
Despite Hong Kong’s invites, some are guardedly hopeful.
Jackson Wong, associate director at Huarong International Securities, said that the Act in concert Seng could claw back to 30,000, citing optimism inspired by the agreement for a 90-day ceasefire on new tariffs between presidents Donald Trump and Xi Jinping.
What is needed, Wong told, is China finding substitute buyers in Europe and emerging markets for its tariff-hit products and some sort of deal with the U.S., all the more if it doesn’t solve all the outstanding issues.
Hong Kong, he said, is depending on it.
“If China cannot figure a way out of this, we are appease in trouble,” he said earlier this month.