Hong Kong stocks slump, snapping 6-day rally as China frenzy shows exhaustion

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A key technical indicator shows the market is massively overbought, signalling an imminent reversal

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Hong Kong stocks take a breather on Thursday after a six-day rally pushed the market into a danger zone. Photo: Jelly Tse

Jiaxing Li

Published: 10:10am, 3 Oct 2024Updated: 4:33pm, 3 Oct 2024

Hong Kong stocks fell for the first time in seven days as the US$3 trillion market rally driven by China’s stimulus injection ran out of gas. A key technical indicator pointed to an imminent reversal from a 20-month high.

The Hang Seng Index slipped 1.5 per cent to 22,113.51 on Thursday, paring an intra-day slide of as much as 4.5 per cent. The Tech Index declined 3.5 per cent. Markets in mainland China are closed this week for a holiday.

Alibaba Group Holding tumbled 4.9 per cent to HK$109.50, e-commerce peer JD.com retreated 8.3 per cent to HK$169.70 and search engine operator Baidu declined 6.3 per cent to HK$108. Homebuilder New World Development slumped 13 per cent to HK$9.20, Longfor sank 10.4 per cent to HK$16.80 while China Resources Land weakened 7.3 per cent to HK$29.35.

Before today, local stocks had risen by 23 per cent amid record turnovers since Beijing cut rates and unleashed a US$114 billion package to rescue the stock and property markets on September 24. That rally pushed the Hang Seng Index’s 14-day relative strength reading past 90, exceeding the 70-point threshold that technical traders rely on as a danger sign.

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“What has happened in the past week has already reminded us about the epic bubble and burst in 2015,” Nomura economists including Ting Lu said in a note to clients on Thursday. “A more sober assessment is required” as China’s current economic fundamentals are still weak, they added.