New | More downside seen in Hong Kong and mainland China markets
Weaker-than-expected economic data could trigger a further sell-off in stocks, increasing capital outflows
Hong Kong and mainland Chinese shares may continue to see sell-off risks this week as weak economic data due on Wednesday could become a new trigger for a correction in the market and capital continues to flow out of the country in the near future.
The National Bureau of Statistics is set to announce a basket of economic data on Wednesday, including monthly reports on housing sales, fixed-asset investment and consumption.
The key Shanghai Composite Index ended the week 2.2 per cent higher at 3,744.21 points, while Hong Kong’s benchmark Hang Seng Index edged down 0.34 per cent to 24,552.47 points, posting a loss for a third week.
Capital outflows from Hong Kong and mainland Chinese equities are seen to continue, with global asset managers increasing their short-selling ratio in some key indices and relocating some of their portfolio to developed markets amid the rising likelihood of a rate rise in the United States.
US jobs rose solidly in July by 215,000 while unemployment held at a seven-year low of 5.3 per cent, bolstering the view that the Federal Reserve will raise rates as early as next month.
“Although Chinese markets had a summer sell-off, I still don’t think direct investments in high-quality Chinese companies are cheaper than what we can get through international companies that have big business in China,” said William Nygren, a portfolio manager with Harris Associates. “Additionally, we like the legal protection and corporate governance protection you have when investing in developed markets.”
Hong Kong equities have seen two consecutive weeks of capital outflows while mainland Chinese equities have seen four, according to Jefferies global fund tracker data released on Friday.
