NTES - Hoping For Better Luck HK Stocks Enter The Year Of The Dragon | Benzinga
Key Takeaways:
- Since its launch in 1969, the Hang Seng has always risen in the dragon years, with gains averaging around 14%
- But any rally this time could be hampered by uncertainties over the U.S. presidential election and interest rate policy
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By Fai Pui
Could the dragon breathe new life into Hong Kong stocks after investors ran scared in the year of the rabbit?
Market watchers will certainly be hoping for a stronger performance in what is considered a lucky year in the Chinese calendar. The only mythical creature in the Chinese zodiac, the dragon is associated with good fortune, strength and vigor, characteristics that have been sorely lacking on the Hong Kong stock market.
In the past year, Hong Kong share prices were unable to capitalize on the lifting of China’s Covid controls and were hammered by China’s weak economic recovery. Tensions with the United States over trade and technology also took a toll. In the lunar year that just ended, the benchmark Hang Seng Index (HSI) fell a whopping 28.6%, or 6,298 points, making it the worst year of the rabbit on record.
But the gloom lifted as China ushered in the year of the dragon. In the first three trading days, the Hang Seng rallied 593 points to break above the 16,300-point level. The propitious start could signal that the market is destined to have a better year.
There had been positive omens even before the new year. For example, the Chinese authorities pledged stimulus for the economy and the stock market, including a stabilization fund of two trillion yuan ($277.8 billion). Moreover, some foreign investors who had shunned Chinese companies started to have a change of heart. In the fourth quarter of last year, Canadian pension funds bought stocks in Alibaba (NYSE: BABA), Li Auto (NASDAQ: LI), JD.com (NASDAQ: JD) and NetEase (NASDAQ: NTES). Meanwhile, the investor Michael Burry, famous for his "Big Short” strategies, increased holdings in Chinese stocks such as Alibaba and JD.com through his hedge fund Scion Asset in the last quarter of 2023.
However, major investment banks and brokerage firms are being cautious in their new year stock forecasts. Although prices of companies listed in mainland China and Hong Kong have plumbed the depths, they could still have further to fall amid China’s uncertain economic recovery and strained relations with the United States. Also on the list ...