Stock market downturn persists: Asia faces a triple threat, Hang Seng Index hits a three-month low

Global Uncertainty Overlaps, Hong Kong Stocks Fall the Most

December 16 Asian market conditions are bleak. The Hang Seng Index fell 1.9% to 25,139 points by midday, hitting a three-month low since September 4, with only 5 out of 89 constituent stocks closing in the green. The Hang Seng Tech Index plunged even more sharply, dropping up to 2.4% in a single day. Leading companies such as Alibaba, Tencent, SMIC, Zijin Mining, and China Hongqiao all declined significantly, with declines ranging from 1.4% to 5.8%.

Behind the market’s cautious sentiment is investors’ focus on the US employment report and Federal Reserve interest rate policies. Strong non-farm payroll data could weaken expectations of rate cuts, further depressing the high valuations of global tech stocks, and this uncertainty is triggering a broad-based sell-off.

Other Asian stock markets are also unable to escape adjustments, with South Korea’s KOSPI and Taiwan Weighted Index both falling within 1%. Securities and tech stocks are hit hardest, prompting investors to shift towards bonds and safe-haven assets.

China’s Economic Data Slows Down, Domestic Demand Concerns Deepen

More critically, signs of slowing economic growth in China have already emerged. The latest economic data released in November show retail sales increased by only 1.3% year-over-year, well below the expected 2.9%, marking the weakest performance since the pandemic. Meanwhile, fixed asset investment continues to decline, and housing prices show no signs of stabilization.

These data reveal a worrying reality: weak consumer momentum and doubts about the sustainability of domestic demand recovery. Corporate earnings prospects are under pressure, especially for overvalued tech and financial stocks, which face a double squeeze—bearing the brunt of economic slowdown while also adjusting to high valuation correction expectations.

Nomura Holdings China economist Lu Ting predicts that if policies do not keep pace, China’s GDP growth rate could fall to 4.1% in the first half of 2026. Currently, Beijing has not implemented large-scale fiscal stimulus, with only a 5.2% growth in the first nine months. The annual 5% target remains within reach, but the government’s cautious stance is reinforcing market wait-and-see sentiment.

Valuation Attractiveness Exists, but Funds Are Watching

From a fundamental perspective, China’s overall P/E ratio is about 12x, which is attractive. However, the lack of earnings upgrades and retail fund inflows has kept capital on the sidelines. In contrast, mainland stocks benefit from domestic policy expectations and show more resilience, while Hong Kong stocks are exposed to global capital flows, making them more susceptible to US market swings.

Hao Hong, Chief Investment Officer of Lotus Asset Management, notes that Beijing’s stimulus expectations will focus on consumption, and the relative performance of non-tech stocks is expected to continue for at least one quarter. Melody Lai, analyst at SPDB International, warns that current market sentiment is volatile and not an ideal entry point.

Investment Advice: Short-term Defense, Long-term Attack

For Taiwanese investors, a layered strategy is recommended at this stage. In the short term, volatility in Hong Kong and Asian stocks will increase. It is advisable to avoid overvalued tech stocks and shift towards defensive consumer or value stocks, especially those benefiting from China’s domestic demand stimulus. Meanwhile, closely monitor Fed movements and Beijing policy details, maintaining diversified allocations to manage potential risks.

In the long run, if Beijing proceeds with increased fiscal stimulus as expected in the first half of 2026, valuation recovery space for Chinese stocks will open significantly, and the lagging phenomenon of HSCEI may reverse. Value Partners remains optimistic about the long-term growth momentum of AI and tech sectors but remains cautious about recent interest in the consumer sector.

Overall, this round of Asian stock adjustments reflects the macroeconomic transition, with China’s growth concerns intertwined with tech rotation. In times of uncertainty, opportunities often lie within adjustments, but investors need patience and precise strategies to navigate these waves of volatility.