UPDATE: The Hang Seng Index has plunged 5.4% to H$25,800, raising urgent concerns about a potential crash as the Chinese economy falters. As of November 2023, the index has seen significant volatility, primarily due to ongoing issues in the real estate sector and disappointing manufacturing data.
Recent reports indicate that New World, one of the index’s major constituents, is facing severe liquidity challenges, despite having raised $1.2 billion in debt—well below the anticipated $1.9 billion. This has left the company struggling under a burden of $6.8 billion in debt. The turmoil in China’s property market continues to escalate, echoing the crisis triggered by the collapse of Evergrande two years ago. Other major players, including Vanke and Link Real Estate, are also in distress, with Vanke seeking a one-year extension on its payment obligations amid opposition from bondholders.
The situation is exacerbated by a broader economic slowdown in China, where newly released data reveals that the manufacturing sector contracted for the eighth consecutive month. The manufacturing PMI dropped to 49.9 in November, indicating diminishing demand. Analysts warn that while a recent truce with the USA might help exports, geopolitical uncertainties are expected to stifle recovery efforts.
As a positive note, some analysts suggest that the slowing economy may prompt the Chinese government to introduce more stimulus measures. Over the past few months, Beijing has already injected $141 billion into the economy, but expectations for significant support have shifted to early 2026 rather than within the remaining weeks of 2025.
In the past month, Link Real Estate‘s stock has been the biggest loser on the Hang Seng, dropping 14.65%. Similarly, Li Auto, a leading electric vehicle manufacturer, saw a 14% decline as its growth slowed. Other laggards include major firms like WuXi Biologics, Lenovo, New Oriental, Xinyi Solar, JD, and Xiaomi. Conversely, shares in companies like Hansoh Pharmaceutical, ZTO Express, Midea Group, CK Hutchison, and Haier Smart Home have fared better.
Technical analysis indicates a bearish outlook for the Hang Seng Index, which has been under pressure for months. The index recently formed a double-top pattern at H$27,190 and a neckline at H$25,190, marking its lowest level since mid-October. A drop below this neckline could trigger further declines, potentially reaching H$24,000.
With these critical developments unfolding, investors and market analysts are urged to monitor the situation closely. The implications of a continued downturn in the Hang Seng Index could have ripple effects across global markets. Stay tuned for further updates as this story continues to develop.
