Chinese COVID Easing and Disappointing Trade Data Sent Hong Kong Stocks Plummeting

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Hong Kong stocks saw sharp declines, leading losses in the Asia-Pacific region as China announced further loosening of Covid measures, a move that markets had widely anticipated.

The Hang Seng Index fell 3.77%, with the most considerable losses seen in healthcare and consumer-focused stocks dragging the benchmark lower for a consecutive day.

According to customs data, China’s trade data for November came in lower than expected, leading to further declines in Hong Kong stocks.

In mainland China, the Shenzhen Component rose modestly by 0.175%, ending the day at 11,418.76. This is despite the Shanghai Composite slipping by 0.4% to 3,199.62 as investors reacted to weaker-than-expected trade data from China for November.

The mixed performance in Chinese markets was in stark contrast to Hong Kong’s Hang Seng Index, reversing earlier gains seen during the trading session as the market reacted negatively to the announcement of further Covid restrictions being eased off in China.

“Subsidies will play a big role in helping bridge the gap from an economic standpoint, but there will also be price increases to customers,” said Abhinav Davuluri, technology equity strategist of Morningstar.

Healthcare and consumer stocks were hit particularly hard, leading many analysts to question whether recent efforts of easing virus control measures had been factored into stock prices beforehand.

The Nikkei 225 in Japan plunged 0.72% on Tuesday, closing at 27,686.40, while the Topix fell by 0.1% to 1,948.31, as investors responded to weak trade data from China and further Covid easing measures announced by the Chinese government.

Elsewhere in Asia, the Reserve Bank of India announced a 35 basis point rate hike to 6.25%, in line with the expectations of economists polled by Reuters.

The overall sentiment in the market was also weighed down due to a stronger yen against other currencies, which weakened exports from Japan and impacted investor confidence.

The currency’s strength dampened hopes of more substantial economic growth for the country amid worries about the third wave of Covid-19 infections in some parts of the world, including Europe and Australia.

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