Hong Kong stocks tumbled nearly 500 points during intraday trading on Monday — as the city’s somber mood coincided with a slowdown of peripheral markets around the world.
The benchmark Hang Seng Index ended down 1.79 percent, or 487 points, to close at 26,820 points — its third consecutive day of losses. The volume of turnover stood at HK$124 billion.
Even though a correction will not occur for some time, the fact the Hang Seng Index dropped below 27,000 points on Monday might mean ‘bottom-fishing’ by investors could eventually help it
Linus Yip Sheung-chi, chief strategist at First Shanghai Securities
The Hang Seng Index’s lackluster performance, again evident on Monday, is likely to continue in the short term, said Linus Yip Sheung-chi, chief strategist at First Shanghai Securities.
Meanwhile, many markets in other parts of the world are also suffering from the impact of the spread of the novel coronavirus. This includes the US, where blue-chip stocks such as Apple and Adidas were revising their targets for the first quarter — acknowledging that good sales performance is now unlikely.
Even though a correction will not occur for some time, the fact the Hang Seng Index dropped below 27,000 points on Monday might mean "bottom-fishing" by investors could eventually help it, Yip said. Bottom-fishing occurs when investors buy stocks whose prices have dropped and are considered undervalued.
Yip suggested investors should not be too worried about repositioning — as the market would be still volatile and uncertain for some time. Internet stocks, such as e-commerce giant Alibaba and Shenzhen-based Tencent, and food delivery firm Meituan Dianping, were worth watching.
So were some 5G stocks such as ZTE and China Tower, he added.
Discussing Morgan Stanley’s earlier downgrade of the Hang Seng Index's target — from 27,500 to 26,820 points — by the end of 2020, Yip admitted the coronavirus outbreak would affect the brick-and-mortar economy and also corporate earnings in the first quarter. But he still believes an economic recovery could come back even stronger in the second half of the year.
