Hang Seng Index sank for 4consecutive days

Review & Outlook of Market Performance

    The notion of “Sell in May” worked fine this week. Even though Chinese A-share markets saw the biggest gains in five weeks on Tuesday, Hong Kong stocks fell the most in almost 3 months as investors played catch-up with Asia-wide losses the day before. Shares in the local bourse stayed in the negative territories for the rest of the week as sentiment was further soured by weak macro data. The Caixin Purchasing Managers’ Index (PMI), a privately produced measure of China’s factory activity, fell unexpectedly to 49.4 in April, down from 49.7 in March, while China services PMI also slipped to 51.8 in April from 52.2 in March, suggesting Chinese services activity expanded at a slower pace. Over the week, the Hang Seng Index fell 957.18 points or 4.54% w-o-w to 20,109.87, while the HSCEI dropped 5.23% w-o-w to 8,471.70. The daily average Mainboard turnover amounted to HK$65.8 billion, up from HK$60.4 billion in the previous week.

    Hong Kong had a bad start in the second quarter as key economic indicators showed operating conditions in the private sector worsened. The Hong Kong PMI fell to an eight-month low of 45.3 in April from 45.5 in March, suggesting a further deterioration in Hong Kong's private sector amid China's economic slowdown. On the other hand, retail sales fell for the 13th successive month in March, given fall in visitors and weak local consumption.

    In spite of weak market sentiment, small-cap listing candidate received overwhelming response. The retail tranche of label makers Hang Sang (03626), with market canalization of HK$250 million, will likely be oversubscribed by more than 2,000 times. On the other hand, the 6th batch of iBond is set to be launched in late May this year. Despite the latest interest payment has dropped to 2.37% from the peak of 6.08%, the newest batch of iBond is expected to receive enthusiastic responses from local residents given its virtually free-of-risk nature.

    Market sentiment is likely to remain in a weak tone and may test 20,000 level next week. Investors should keep eyes on the US non-farm payrolls report due tonight (6th May), which may provide some hints on the timing of the next interest rate hike in the US.