Hong Kong's Hang Seng had its best month since 1998, but remains in bear market territory

Hong Kong's benchmark scale soared 26.6% successful November – the Hang Seng index's highest monthly summation since October 1998, oregon adjacent the extremity of the Asian fiscal situation 24 years ago.

But the scale inactive sits successful carnivore marketplace territory, which is defined arsenic down 20% from a caller high, lasting astatine a nonaccomplishment of 20.45% nonaccomplishment year-to-date arsenic of Dec. 2.

Hong Kong's economy, including its banal market, has been battered by Beijing's prolonged zero-Covid argumentation that has unopen retired travelers from mainland China and dampened user confidence. Shares listed successful Hong Kong person whipsawed betwixt sell-offs and rallies wrong a azygous trading time connected unconfirmed rumors that hinted astatine a displacement successful China's policies.

The volatility successful the Hong Kong banal market, however, dates backmost adjacent further than this year. Strategists astatine Goldman Sachs said from February 2021 to October 2022, the Hang Seng scale saw a "systemic correction," which the steadfast defines arsenic a autumn of 40% oregon more.

During that 10 period period, the HSI plunged 53% from peak-to-trough, Goldman strategists noted.

"This is the astir important marketplace sell-off since the dislocation during the Global Financial Crisis, also putting the drawdown into the Systemic category per our classification," the firm's China equity strategists Kinger Lau and Si Fu told CNBC successful an email.

The squad added that it's "impossible to telephone the marketplace bottom" for the index, based connected its trading patterns, which has shown large volatility successful the past 2 years.

Analysts astatine Weiss Multi-Strategy Advisers said, "November may, successful hindsight, beryllium viewed arsenic a cardinal turning constituent for Chinese equities," noting the Hang Seng China Enterprise scale and the spot assemblage saw important gains.

"Property stocks were boosted by relaxed collateral and equity issuance standards, and tech stocks person been beardown connected net and reopening hopes," the analysts said successful a report.

After its November gains, the Hang Seng scale hovered astir 18,600 – a level of absorption according to marketplace watchers.

"With the 18,600 level of absorption being flooded for the Hang Seng Index, that could look to spot the cardinal intelligence 20,000 level connected watch," IG marketplace strategist Yeap Jun Rong said successful a Thursday note.

He added the latest messaging from the Chinese government, including wellness officials encouraging aged vaccination and broader signs of shifting distant from its zero-Covid policies, has lifted the region's banal market.

"Recent events person been supportive of the worst-is-over stance for Chinese markets," helium said, adding that the events person led to a "much-needed calm" to Chinese equities that proceed to propulsion higher connected reopening hopes.

The HSI past fell beneath the 20,000 level successful August, and analysts expect to spot a continued rebound successful the equity marketplace connected further signs that the federation volition displacement distant from zero-Covid.

In a erstwhile report, the strategists astatine Goldman Sachs said they expect to spot a 20% rally successful the Chinese banal market erstwhile the state reopens.

The strategists said the monthly banal performances seen successful November enactment that view.

"These rhythm analyses constituent to a strong imaginable that the marketplace could signifier a betterment rally sometime successful 2023 aft a precise challenging show successful the past 2 years," they said successful an email to CNBC.

"The reopening catalyst could assistance substance the rhythm displacement to a 'Hope' phase," they said, "where equity valuations thin to grow [or] retrieve contempt a still-challenging net outlook."

— CNBC's Evelyn Cheng contributed to the story