Hong Kong stocks enter bear market territory as China reopening optimism continues to fade

Hong Kong's benchmark scale entered carnivore marketplace territory Wednesday connected an intraday basis, erasing the rebound gains from China's reopening.

The Hang Seng index deed a league debased of 18,105.78. That's 20.2% beneath its 52-week closing precocious of 22,688.9 reached connected Jan. 27. A method carnivore marketplace is defined arsenic erstwhile prices autumn 20% beneath caller highs.

Hong Kong exertion stocks were among the starring decliners for the wide index, including net institution NetEase and e-commerce platforms Meituan and JD.com. Alibaba shed astir 3%, Baidu fell much than 4%, and Bilibili plunged by 6%.

The Hang Seng Tech index has already fallen by much than 25% from its January peak. That's a stark opposition to the reopening optimism that had erstwhile driven Asia-Pacific's benchmark MSCI Asia Pacific scale to a bull market.

The Hang Seng China Enterprises index, which measures the show of the 50 largest and astir liquid mainland Chinese companies listed successful Hong Kong, has besides retreated by much than 21% from its January peak.

Analysts had initially expected China's system to retrieve faster and earlier than expected, but that presumption rapidly faded aft the state continued to present disappointing economical data.

The latest mill enactment speechmaking for China came successful astatine 48.8, beneath the 50-mark that separates maturation from contraction — and missing the 49.4 estimation from a Reuters poll.

Morgan Stanley analysts said successful a May 17 study that a anemic speechmaking successful that manufacturing measurement "has been a coagulated precursor to argumentation easing." Economists told CNBC that a disappointing rebound could pb to much authorities stimulus ahead.

"If maturation does not accelerate sufficiently to constrictive the output gap, societal stableness hazard whitethorn emergence and yet trigger more meaningful stimulus," Morgan Stanley analysts wrote successful the note.

The National Bureau of Statistics noted the purchasing managers' scale for ample manufacturers came successful astatine 50, portion that of smaller manufacturers was lower. The scale for services enactment remained successful expansionary territory astatine 54.5, but marked a second-straight period of decline.

Citi economists wrote successful a Wednesday enactment that the latest economical information missing expectations by a ample borderline is seen arsenic "signs of fatigue with the archetypal reopening impulse peaking."

"Insufficient request could beryllium the large interest now, and determination are some cyclical and structural causes for it," they wrote, adding the "initial boost to the services assemblage from reopening could beryllium fading."

Citi economists besides expect the People's Bank of China to chopped its medium-term lending installation rates by 20 ground points and its reserve request ratio by 50 ground points by the extremity of the year.

"We reckon that the Chinese system could beryllium connected the verge of a self-fulfilling assurance trap and judge decisive argumentation actions are needed," they wrote.

"There could beryllium constricted country for fiscal easing from the fund and we expect structural easing efforts with much efforts from the cardinal authorities and quasi-fiscal tools via argumentation banks," they wrote.

– CNBC's Evelyn Cheng contributed to this report