Stock market euphoria has changed to despair as the benchmark index failed to rebound on Thursday after a plunge of nearly 1,000 points, or about 3.5 percent, in the past two days.
Stock analysts began to question whether the year-long bull market has finally run its course. Prices of shares in nearly all sectors receded causing some analysts to wonder when the so-called psychological level at around 28,000 will be breached.
Sinking below that “barrier,” some analysts agreed, would have dealt a serious blow to investors’ confidence with unpredictable consequence. Others have maintained there is nothing to worry about as the market is going through a period of consolidation after the strong rally in past weeks.
Such optimism was based mainly on the latest economic data which suggested that global economic growth is gathering momentum while inflation is kept in check. The trend should benefit the external-oriented economy of Hong Kong where the government has already revised upward its growth forecast for 2017.
But the biggest concern in the minds of many investors who have built up a large portfolio of Hong Kong-listed stocks, including the H shares of mainland enterprises, is the mostly unpredictable flow of overseas capital.
Trading in the local stock market is seen to have been dominated by Chinese mainland capital in the past several months. Their preference was made clear by the sharp rise in the shares of the H shares of mainland technology companies and car makers.
But the sharp fall in the share prices of mainland companies in these two sectors have wondering if that was simply due to profit taking or a fundamental change in mainland investors’ strategy. With such doubts in mind, many investors found that their only option was to unload at least a part of their holdings in a hurry.
It is too early to tell if the selling pressure will turn into an avalanche, triggering a full-scale retreat. The key, according to some analysts, is to keep the index from falling below the 28,000 line.