GT Voice: Global headwinds are causing wild market volatility in Hong Kong

File photo: VCG

The volatile performance of the Hong Kong stock market amid a series of global uncertainties in recent weeks may have raised concerns among investors about the market’s investment value. But Hong Kong’s position as one of the world’s leading financial centers, with the unwavering support of China’s central government, will not change.

The Hang Seng index plunged to its lowest level in six years, losing 22% this year on Tuesday. But the index quickly rebounded by around 16% in the next two trading sessions, on the back of the central government’s firm promise to shore up the capital market, which boosted investor confidence significantly.

It should be pointed out that the recent stock volatility in Hong Kong and mainland stock markets, which has little to do with the country’s economic fundamentals, is mainly due to the recent surge of COVID-19 in a decade or so. Chinese provinces and cities, and the sudden military confrontation in Ukraine, as well as the hike in US Federal Reserve interest rates that precipitated capital outflows from emerging markets.

Last month, Hong Kong was hit hard by the highly contagious Omicron variant, while the Chinese mainland also struggled with a voracious resurgence. While strict anti-virus measures are expected to have a temporary impact on the economy, it is the changing geopolitical situation in Europe that has fueled market volatility.

In addition to the global liquidity crunch resulting from the Fed’s monetary policy tightening, the recent Russia-Ukraine conflict and US-led Western sanctions against Russia have led to a dramatic increase in currency aversion. market risk.

And, earlier this month, the US government threatened to penalize Chinese companies listed in the US, announcing a tentative list of five companies at risk of being delisted from US stock exchanges, which turned out to be be a trigger for investor sell-offs in Hong Kong and mainland markets.

With all the factors in play, Hong Kong is, to some extent, at the forefront of a major financial rivalry between China and the United States. Investor sentiment will no doubt be affected by the turbulent events on the global horizon. However, the investment value of Hong Kong and mainland capital markets has not seen dramatic changes and will only improve, supported by the country’s strong economic resilience.

As long as Hong Kong can maintain basic financial stability during a time of global turmoil, its advantages as a bridge connecting mainland China and international markets will be on full display, attracting more attention from global investors.

Under such circumstances, what mainland China should do is provide stable expectations for Hong Kong’s financial sector, which is central to attracting foreign capital, preventing fund outflows and ensuring the Hong Kong’s status as a major financial centre. On the contrary, the continuous growth and opening up of the Chinese economy is the solid foundation for the development of the Hong Kong stock market.

Thus, more efforts are needed from the government when it comes to promoting the development of the Guangdong-Hong Kong-Macao Greater Bay Area. Close economic cooperation between Hong Kong and the mainland, especially regions like Shenzhen and Zhuhai, will provide Hong Kong with better conditions to better integrate into the country’s overall development, which will help create more attractive capital markets. both on the mainland and Hong Kong.

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