Hong Kong Stocks Drop Amid Middle East Tensions, China Economic Concerns
Hong Kong stocks opened lower on Monday morning, with the Hang Seng Index down 94 points or 0.4% to 23,431. The decline reversed gains recorded in the previous session, triggered by worsening global sentiment after US stock futures plunged amid escalating tensions in the Middle East. Uncertainty increased sharply after US President Donald Trump ordered an attack on Iran's nuclear sites, triggering market concerns about the potential for a wider conflict in the region.
The US State Department added to the confusion by issuing a global travel warning, advising US citizens to exercise caution around the world. This followed a strong statement from Tehran which vowed to retaliate against attacks on its nuclear facilities. These geopolitical tensions have made investors tend to avoid risky assets and choose to wait for further clarity before taking positions. Other Asian markets also experienced pressure, indicating the broad impact of these tensions on global markets.
On the regional economic front, investors also digested the latest Foreign Direct Investment (FDI) data from China, which showed a 13.2% year-on-year (yoy) decline in the first five months of 2025. This decline occurred despite significant growth in the high-tech sector, which has been the main driver of China's economic recovery. Market concerns are growing that the downward trend in foreign investment reflects a decline in global investor confidence in the long-term prospects of the Chinese economy.
However, selling pressure on the Hong Kong stock exchange was slightly restrained by positive news from local economic data. Hong Kong's current account surplus jumped to HK$125.2 billion in the first quarter of 2025, up sharply from HK$95.3 billion in the same period last year. In addition, the city's annual inflation rate eased to 1.9% in May, easing concerns over consumer price pressures after peaking at 2% in April.
Consumer and technology stocks were the main drags on the index, with several major issuers falling significantly. China Longyuan Power slumped 3.5%, Techtronic Industries dropped 2.5% and tech giant Tencent Holdings lost 1.6% in early trade. Meanwhile, financial stocks remained sluggish, reflecting market players' caution about the direction of interest rates and future economic stability. With geopolitical tensions still lingering and regional economic uncertainty, Hong Kong's stock market is expected to remain volatile in the near term.
Source: Newsmaker
