Picture of the Day: Bearish Bear Market

Screen shot from Bloomberg of the Hang Seng Index today

This graph is somewhat alarming -- the Hang Seng Index falling below 15,000 points today.

It's now at the same level as it was during the handover in 1997. The Hang Seng Index has lost almost 13 percent this year in the market's worst start to a year since 2016. 

"It's capitulation," said Dickie Wong, executive director at Kingston Securities. "No matter what the central bank does, it will not change the fact that foreign investors have zero confidence in this market now."

Yikes.

Part of the bearish market is due to China refusing to stimulate the economy by pumping money into it, while its property market is still struggling.

The trading session has just ended, with the markets closing at 14,951.70.

Not a good Monday...

Only Good News in Hong Kong

Lee tells journos to tell more good stories about Hong Kong

Chief Executive John Lee Ka-chiu is telling journalists to tell "good Hong Kong stories" to counter what he called "slanders and attacks" from the West.

He said this in Mandarin during an event held by the pro-establishment Hong Kong Federation of Journalists. During his speech Lee claimed politicians and journalists from the West were "time and again targeting Hong Kong by fabricating lies, spreading false narratives, slandering Hong Kong, and intentionally speaking of Hong Kong like a place with no freedom."

"In the face of these immoral people, Hong Kong's journalists should all the more unite, take the initiative and be professional," Lee said.

"[Journalists] should tell good stories of Hong Kong's special advantages, international business environment and captivating nature at our doorstep... to counter the slander and attacks aimed at Hong Kong," he added.

Let's see...

This week the Hang Seng Index fell below 16,000 points, well below what it was in 1997;

Property prices have fallen to its lowest in seven years;

The city's press freedom has plummeted to 140 out of 180 regions by Reporters Without Borders;

Hong Kong's birth rate is one of the lowest in the world;

But the good news:

More mainlanders are settling in Hong Kong;

It's fun to go shopping in Shenzhen;

Someone has a chance of winning HK$38 million in the Mark 6 Jackpot;

The MTR has new eight-car trains that are being put into service.

We try to tell the good news, if the government had some...

China Finally Easing Covid Restrictions

Lockdown scenes like this will be disappearing in China

There is big news from China -- it is finally beginning to ease Covid-19 restrictions and it's quickly being reflected on the bourses in Hong Kong and Shanghai. The Hang Seng Index jumped 7.7 percent to end trading at 17,319.76.

Those traveling to the mainland will only quarantine for five days compared to seven previously, and then three days of home monitoring.

More importantly the practice of cancelling international flights if there are too many infections on previous flights will be scrapped. 

There will be increased flights to/from China

This was a major barrier to not only people returning, but also those making business trips. Once the number of flights ramp up, ticket prices will finally go down.

Travelers coming to China only need to show one PCR negative test taken 48 hours before boarding, while close contacts of a positive infection will only be quarantined for five days instead of seven.

In addition, the State Council announced that Covid-19 testing will only be conducted in key areas where cases have been detected. Previously an entire region would undergo mass testing despite no recorded outbreaks in the wider area. Now they will focus testing when the source and chains of infection and transmission are unclear.

And finally the government is prioritising vaccinations, particularly among the elderly, and developing vaccines with "broad-spectrum protection" -- perhaps a euphemism for bivalent? Foreign-made?

Strange that the State Council did not announce this during the national congress, or was it for Xi to show off to the country and the world his unyielding power and then now quietly admit it's time to start moving on like everyone else?

Finally more elderly will be boosted with jabs

While this is good news for everyone, it is probably too late to salvage the economy, particularly when it is related to global trade. Foreign companies have already begun or already detached themselves from the Chinese supply chain and sourcing products and services elsewhere.

Even though state media seems to think, or wants people to believe China's economy will bounce back right away once the restrictions are relaxed are kidding themselves, and the domestic market has no appetite for consumption. Even the uber rich are looking to exit the country as they feel uneasy under Xi's rule.

Still a long ways yet from regular tourists coming to China, but at least business travelers who need to go there can do so with a bit less trepidation.

HK Stocks React to Xi

Xi and Politburo move markets in a downward direction

How did Hong Kong react to General Secretary Xi Jinping's extension of power for at least another five years and his seven-man Politburo lineup?

The Hang Seng Index plunged over 700 points to drop below 16,000 points, a 13-year low. The index fell 4.4 percent to 15,494. 24 at 11.01am local time, the lowest level since May 2009. There was a major sell off of tech stocks, with Alibaba Group falling 8.8 percent to HK$63.50, a record-low close, and Tencent Holdings slumped 7 percent to HK$216.80. Meituan slumped 9.5 percent to HK$128,10.

HSI plunged below 15,000 in 13 years

Developer stocks also dropped, with Longfor Group falling 9.4 percent to HK$17.30 and Country Garden lost 7.7 percent to HK$1.32.

In his report to the Congress, Xi called for "regulating the mechanism of wealth accumulation", signalling a tighter oversight of private capital following months of crackdown on tech companies, while also pushing his vision for "common prosperity" in a bid to close the wealth gap in the country.

China's economy grew only 3.9 percent in the third quarter when it had projected 5 percent, demonstrating a lack of consumer confidence in the retail sector, which only grew 2.5 percent in the third quarter.

Does Xi even care about economic numbers? This slide backwards is a rebuke to what Jiang Zemin/Zhu Rongji and Hu Jintao/Wen Jiabao did in the past 20 years.

Unless Xi has an economic miracle up his sleeve, stocks are going to sink further.

Lee to Attempt Luring Talent to Hong Kong

Lee gives his maiden policy speech in the Legislative Council

Hong Kong Chief Executive John Lee Ka-chiu has delivered his first policy address that clocked in at two hours and 45 minutes... longer than Chinese President Xi Jinping's summary of the work speech a few days ago at the National Congress.

In it there was no mention of Hong Kong going to "0+0", or zero quarantine, nor was there a hint that people could use barbecue pits anytime soon. They have been closed indefinitely throughout the pandemic.

What was mentioned that caught our attention was Lee's keenness to entice new talent to the city to make up for the brain drain in the past year of tens of thousands of Hongkongers emigrating overseas.

Lee acknowledges over 140,000 have left HK

"Over the past two years, the local workforce shrank by about 140,000. Apart from actively nurturing and retaining local talents, the government will proactively trawl the world for talents," his speech transcript said.

Lee announced the city's 17 economic and trade offices will expand to include offices specifically to lure business and talent to Hong Kong. Not only will they try to lure professionals who earn at least HK$2.5 million a year, but also recent graduates from the world's top 100 universities who have three years' work experience.

The government will also make it easier for companies to hire people to come to Hong Kong to work by removing the requirement to prove the difficulty of hiring locally, while employment visas will be extended to three years (currently two years).

And those foreigners who live and work in Hong Kong for seven years not only can become permanent residents, but also get a stamp duty refund if they buy property (if they can afford it).

His speech aims to lure foreign talent to HK

While all these measures are all good and well, if Hong Kong doesn't completely relax its Covid-19 policies, people still will not come. The city has also had a terribly battered reputation following the 2019 protests and implementation of the national security law could spook some people from coming. 

One observer sarcastically interpreted these measures as Lee's effort to get overseas Hongkongers to come back into the fold -- but it's unclear which ones he wants to employ and the ones he wants to imprison.

It's really hard to see how Lee can really attract the people he wants to work long-term in Hong Kong unless they have been living under a rock for the past three years at least.

How did the market react? The Hang Seng Index had started slightly up before the speech, but afterwards lost its gains to trade 1.9 percent lower. 

Hang Seng Index Drop

The Hang Seng Index fell for a fourth consecutive day

The chatter these days is about the Hang Seng Index plunging to below 17,000 points, the first time in 11 years. It fell for four consecutive days down 6.9 percent to 16,832.36 on Tuesday.

"Hong Kong stocks will continue to be in the doldrums, given the Covid resurgence and policy tightening overseas," said Zhang Yidong, a strategist at Industrial Securities in Shanghai.

"The flare-up in the pandemic and a slumping property market will make it harder for the economy to rebound this time."

But others remember the HSI dropped 50 percent six months after Carrie Lam Cheng Yuet-ngor became chief executive of Hong Kong, from 33,154 to 16,458.

Nevertheless, her predecessor Leung Chun-ying claims to know the reason for the slump -- ignorant foreign investors.

"Not only do they not know [enough about Hong Kong], they have plenty of misunderstandings or superficial knowledge. Or they were misled, because of smearing campaigns by overseas media and politicians about what's really happening in Hong Kong," he said.

Why is he making this a "them-versus-us" thing, when many of the investors are Hongkongers themselves?

It makes zero sense. He makes it seem like only foreigners have money.

Meanwhile for a third straight day, the People's Daily in China continues to proclaim the country will not "lie flat" when it comes to the pandemic, that it is still pursuing zero Covid...

Others have remarked on social media that the HSI has dropped because the patriots are in charge...