Hong Kong stocks fall 4% as Chinese economy spooks investors

Hong Kong stocks fall 4% as Chinese economy spooks investors

China’s number two, Li Qiang, traveled to Switzerland with a message for business titans gathered for the World Economic Forum.

“Choosing the Chinese market is not a risk, but an opportunity,” said Chinese Premier Li. said a hearing in Davos, Switzerland, on Tuesday.

But there is a different sentiment about China’s influence on the stock market and it is not so optimistic. Concerns about China’s economy have been visible for months in Hong Kong, where stocks have plunged 14 percent last year.

The new year brought no relief either, and economic data released by China on Wednesday prompted another sell-off.

In Hong Kong, where many of China’s biggest companies operate, stocks fell nearly 4 percent. Since the start of the year, the market has lost almost a tenth of its value. In Shanghai, China’s financial capital, stocks fell nearly 2.1 percent, extending this year’s decline to nearly 4 percent.

Even though China said its economy grew 5.2% in 2023, which is high by most standards, it is undergoing massive changes. The country’s leaders are trying to steer China away from real estate and construction, which have long been pillars of growth, while reducing the country’s reliance on borrowed money.

The expected boom in consumption after China abandoned its “zero Covid” policy at the end of 2022 has also not materialized.

A shrinking population and aging workforce add to the headwinds. China also said Wednesday that its population has shrunk by 2 million and is aging rapidly, further straining its already fragile health care system and underfunded pension system.

Although China’s economy has recently shown slight improvement, “the recovery remains clearly fragile,” economists at Capital Economics wrote in a report.

Real estate and consumer companies were among the worst hit by the selloff in Hong Kong, which has for years been a gateway for foreign investors to put money into mainland China. Longfor Group, a Chinese real estate developer, fell 7.8 percent, while Meituan, the Chinese delivery service, fell 7.4 percent.

Stocks in the United States are flat so far this year, while stock prices in Japan are up, more than 6 percent.

Many investors are looking to China to revive its economy with significant stimulus measures, as it has done in the past during economic crises, but policymakers said this time is different .

Mr. Qiang reiterated this reluctance in his speech to the World Economic Forum. “We have been keen to avoid major stimulus measures,” he said, “and have not sought short-term growth at the cost of accumulating long-term risks.”

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David B.Otero

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