(Yicai Global) March 15 -- The Hong Kong stock exchange’s benchmark index dropped below 20,000 for the first time in six years yesterday, as the Russia-Ukraine conflict, US delisting alarm of Chinese stocks and other factors hammer investor confidence. Analysts who spoke to Yicai Global had mixed views on what the future holds.

The Hang Seng Index tumbled 4.97 percent to close at 19,531, below the 20,000 mark for the first time since June 2016. And the bourse’s tech index suffered its biggest daily drop ever, plunging 11.03 percent to end the day at 3,778.6. It is now nearly 70 percent below the peak reached just over one year ago.

The Hong Kong stock market has not been doing as well as the US and Chinese mainland markets since the Russia-Ukraine conflict began, Ping An Bank said. Its stocks are likely to remain volatile in the short term as the geopolitical conflict, the surge of Covid-19 in the special administrative region and the raising of interest rates in the US affect market sentiment.

The Hong Kong bourse was further rattled yesterday when US authorities warned five Chinese firms that they needed to provide audit documents to avoid being delisted. Several US-listed stocks, including ride hailing giant Didi and electric car startup Xpeng, fell by double-digits.

However, this could work out in Hong Kong’s favor, said Kong Rong, an analyst with TF Securities. Chinese firms seeking an overseas listing will probably choose Hong Kong now to avoid uncertainties in the US and this will ease short-term liquidity pressure.

Investors can be optimistic about Hong Kong stocks in the long term because the delisting of Chinese stocks takes time and not all US-listed Chinese companies will delist as this is mainly dictated by emotions, a fund manager said. Internet companies have been cutting their investments abroad to buy back their own stocks, indicating the firms’ management believes in their own worth, he added.

The value of Hong Kong stocks has been at rock bottom for some time now, Ping An Bank said, They should recover in mean value once market sentiment stabilizes and China’s measures to promote growth take effect, it added.

Others, though, were less optimistic. There are a lot of US investors in the Hong Kong stock market, but the high stamp duty in Hong Kong makes investors more willing to invest in the US, a stock fund manager told Yicai Global. However, the US is about to hike interest rates, so some large funds will face higher costs and will thus choose to first sell their Hong Kong stock assets. This will cause the value of the Hong Kong market to fall more than on the mainland or in the US, he said.

An experienced fund manager did some bargain hunting in Hong Kong earlier this month with the hope that the stocks would rebound but they have slid further, he told Yicai Global.

Editor: Kim Taylor