Substantial outflows from emerging market ETFs, driven by US dollar strength, have triggered large and relentless selling in the largest index weightings in Hong Kong (Chinese equities). Fears of a “trade war” have also weighed on China sentiment.
The Hang Seng China Enterprises Index (HSCEI) fell 7.6% in June, while the Chinese mainland benchmark, the Shanghai Composite Index (SHCOMP) fell 8%. From mid-January peak both indices are now down over 20%, triggering a technical “bear market”.
It has been a brutal and indiscriminate technical sell-off in Hong Kong, which has clearly hurt investors, such as myself, who believe in the rise of the Chinese consumer over the mediumterm.