The drop in Hong Kong’s benchmark equity index reflects unease among overseas investors
There’s nothing quite like a bear market for testing stock adages to destruction. This week’s piece of conventional wisdom under the spotlight was “don’t catch a falling knife”, as the Hang Seng index went into freefall at the close of China’s 20th Communist Party Congress.
The drop in Hong Kong’s benchmark equity index – nearly 10pc at one point on Monday, its worst one-day fall since the financial crisis in 2008 – reflected unease, in particular among overseas investors, about what President Xi Jinping’s consolidation of power would mean for the world’s second biggest economy and its financial markets.
The general consensus is that Xi’s dominance, underpinned by a uniformly loyal Politburo Standing Committee, means a continuation of the recent focus on social stability and so-called common prosperity at the expense of economic growth.
The market reaction reflects dashed hopes for a more pragmatic approach, in particular with regard to the ongoing zero-Covid policy which contributed to GDP falling well below Beijing’s 5.5pc annual target in the latest quarter. The published number – 3.9pc – was held back until after the Congress closed for reasons that are obvious in light of the market response.