The initial gain of a Hong Kong-listed gauge measuring Chinese stocks was erased during post-holiday trading due to doubts arising from manufacturing data regarding the strength of the country's recovery.
The Hang Seng China Enterprises Index, after initially rising by 2.1%, reversed its gains and dropped by as much as 1%, driven by declines in property and consumer stocks. Similarly, Hong Kong's main benchmark index, the Hang Seng Index, experienced fluctuations, while onshore markets were closed for a holiday.
The April manufacturing data, which unexpectedly showed a contraction, suggests that China's economy might be facing challenges in maintaining its growth momentum. However, initial data from the Golden Week holiday indicated positive trends in travel, shopping, and Macau casino activities.
Additionally, payment delays by developers have added uncertainty to the outlook for the property sector, despite some indications of ongoing recovery.
China's stock market downturn requires more than just a successful Golden Week holiday to improve the situation.
“The consumer rebound is well known, but the latest PMI data shows the industrial sector may be losing steam,” said Marvin Chen, an analyst at Bloomberg Intelligence.
Investors in the equity market are becoming increasingly frustrated as the anticipated second phase of the reopening rally fails to materialize. Despite economic data for the first quarter surpassing expectations, geopolitical tensions and China's uneven recovery have dampened investor sentiment, leading to a 3.8% loss in April for the HSCEI gauge.
Since January 31, the Hang Seng China index has experienced a decline of approximately 10%, making it one of the poorest performers among the 92 global stock indexes monitored by Bloomberg. This decline comes after a remarkable surge of over 50% from November to January, when the country began to emerge from stringent Covid-19 restrictions.
On Tuesday, negative sentiment was further agggravated by indications of strain in the property sector, with KWG Group Holdings Ltd. becoming the latest Chinese developer to default, and China Vanke Co. falling short of earnings expectations.
According to data compiled by Bloomberg, foreign investors reduced their holdings of mainland stocks in April by selling off 6.57-billion-yuan ($949 million) worth of shares.
Daryl Liew, the head of portfolio management at Sing Alliance Pte. in Singapore, stated that their asset management firm is not making any changes to its China stock positions.
Likewise, Citigroup Inc.'s team specializing in emerging-market equity strategy holds a positive view on China, forecasting that the Hang Seng Index will reach 25,000 by the end of the year.
