Hong Kong Shares In Wednesday Bloodbath Marks Stark Contrast To Euphoric 2018 Start

I’m old enough to remember January 2018, when the Hang Seng and the Hang Seng China Enterprises index each logged a remarkable streak of consecutive daily gains, in the process becoming the poster children for last year’s early melt-up that would ultimately end in a meltdown come December.

Oh, what a difference a year makes. The Hang Seng logged its worst start to a year since 1995 on Wednesday, plunging nearly 3% in the largest single-session decline since October.

(Bloomberg)

Meanwhile, H-shares were similarly bludgeoned, with the CEI diving below 10,000, settling at its lowest point since early 2017.

(Bloomberg)

The proximate cause of the dour start to 2019: a weak read on Chinese manufacturing, as the Caixin December PMI “confirmed” the downbeat message delivered by the official gauge earlier this week.

The Caixin manufacturing gauge printed 49.7 (i.e., in contraction territory), down from 50.2 in November, underscoring rapidly proliferating growth concerns and heightening the sense of urgency around the trade negotiations.

(Bloomberg)

“In general, both the NBS and Caixin manufacturing PMI surveys suggest soft growth momentum in the manufacturing sector in December [as] trade growth may have weakened and domestic demand growth could have stayed soft”, Goldman writes on Wednesday, stating the obvious and adding that if you ask them, the bank “continues to expect more loosening measures to be announced by the government to support economic growth.”

Onshore shares took it on the chin as well, with the SHCOMP falling to a four-year low.

(Bloomberg)

Again, this is not a great start, and not just because stocks fell. Rather, because the action underscores just how concerned market participants are about the growth narrative.

The Caixin print was really just a reiteration of the “official’ number out earlier this week, but there were also disconcerting signs from other regional PMIs and at this juncture, any data that appears to “confirm” the slowdown narrative is met with aggressive de-risking.