Global Wealth Watch: This year, 70% of the global stock markets have declined, but this country has doubled.

This year’s Double 11 shopping festival kicked off on the evening of October 24th, but the place with the biggest discounts is not in the live streaming rooms, but in the stock market.

Taking the Hang Seng Index in Hong Kong as an example, on this day (October 24th), it recorded the largest single-day drop since 2008.

From the beginning of the year to now, if we take a look at the global stock market’s bill, there are quite a few surprises as well as shocks.

This year, the A-share market in China has not been very competitive, but on a global scale, it is not at the bottom of the list.

Most of the countries and regions you are familiar with have seen their stock market declines exceed 20%, such as the US, Hong Kong, and the stock markets of South Korea and Taiwan…

As for the strongest king of the global stock market this year, the answer is quite surprising – Turkey.

This is the only one that has doubled in the global major markets.

From the beginning of the year to October 24th, Turkey’s stock market, which is the Istanbul ISE100 index in the chart, has increased by 114.12%. In just the past two months, it has risen by 53%.

But if you have ever paid attention to Turkey’s inflation or exchange rate, you can know that the wealth of the Turkish people in the stock market is fleeting.

Turkey’s CPI in August rose by 80.2% year-on-year, but the Central Bank of Turkey is still cutting interest rates. Since the beginning of the year, the Turkish lira has depreciated by more than 90%.

It is hard to imagine how ordinary people in Turkey can resist such an outrageous inflation and currency devaluation.

*US Dollar to Turkish Lira exchange rate, statistics as of October 25, 2022.

No wonder many netizens say that Turkey, Erdogan, and economics form an impossible triangle.

If you ignore the Turkish stock market, the characteristics of the remaining global stock market gains and losses list will be more unified.

In summary, under high inflation and geopolitical conflicts, resource-rich countries have made a lot of money in the capital market this year, while the remaining countries and regions can only wipe away tears in disappointment.

Argentina, Brazil, Saudi Arabia, the United Arab Emirates, and Indonesia are a few countries that have been doing well this year by selling energy and mining minerals. They are also a few of the countries where the stock market has risen, with the Argentine stock market rising by 67.35% from the beginning of the year to October 24th.

When it comes to the global stock market, Vietnam is one of the most miserable.

Vietnam was very famous in the first half of the year and almost became a popular area in the eyes of global industrial capital. However, the stock market performance this year is unbearable. The Ho Chi Minh Stock Index in Vietnam fell by 34% from the beginning of the year to October.

This year’s emerging markets have been greatly affected by the interest rate hikes by the Federal Reserve, with a large amount of foreign capital flowing back to the United States. Resource-rich countries with energy and mineral resources can still resist, but emerging markets without “hard currency” have suffered a significant impact.

The Federal Reserve’s interest rate hikes are like adding salt to the wounds of many countries and regions’ stock markets around the world, but the impact on the U.S. stock market is also significant.

The Nasdaq Index and the S&P 500 have both fallen more than 20% this year, which should at least place them in the top ten of the global stock market decline list.

Although the U.S. economic and employment data are good, the current stock market is paying off the debt incurred by the Federal Reserve’s large-scale monetary easing in previous years, and the myth of a ten-year bull market in U.S. stocks is no longer.

There was a widely circulated argument that the Federal Reserve was using interest rate hikes to reap global benefits.

However, if you look at the decline in the U.S. stock market this year, this “harvest theory” seems a bit shaky.

Recently, there has been a lot of analysis on the rise and fall of A-shares that everyone usually sees. Here, let’s focus on the Hong Kong stocks that have been most impacted recently and analyze them carefully.

A while ago, someone posted a picture on Weibo showing that the Hong Kong stocks have already fallen back to the levels of 1997.

Why has the Hong Kong stock market fallen so sharply?

In summary, it is due to Hong Kong’s special status, which has led to internal and external troubles for the stock market this year, overlapping.

Firstly, Hong Kong’s monetary policy is different from that of mainland China. The Hong Kong dollar and the US dollar operate under a linked exchange rate system, which requires maintaining the exchange rate between the US dollar and the Hong Kong dollar at 7.75-7.85.

This also means that Hong Kong’s monetary policy is not as independent.

When the US Federal Reserve raises interest rates, Hong Kong has to follow suit, which in turn significantly increases the financing costs in Hong Kong. This has a substantial impact on Hong Kong’s financial market.

Secondly, geopolitical tensions have tightened, leading to a recent large-scale withdrawal of overseas funds from Hong Kong, flowing back to the United States for risk aversion.

Thirdly, it is a reform originating from the Hong Kong Hang Seng Index.

When internet companies were making a killing in the capital market, the Hang Seng Index did not keep up, but when they were most severely injured, they were caught up by the Hang Seng Index.

In 2020, it was a big bull market for global internet and technology stocks, and the stock markets of Japan, South Korea, and the United States all soared. At that time, the Hang Seng Index was lagging far behind because, at that time, the Hong Kong Hang Seng Index was mainly composed of financial, information technology, real estate, and consumer stocks.

Starting in May 2021, the compilation rules of the Hang Seng Index in Hong Kong were reformed, increasing the weight of Chinese internet companies.

For example, the weight of Tencent and Alibaba in the Hang Seng Index has been increased from the previous 5% to about 7%, and the number of companies included in the Hang Seng Index has also increased.

However, the market value of the two internet giants has shrunk by more than half in the past two years, and the stock performance of other Chinese internet companies listed abroad has also been poor, causing the Hang Seng Index to suffer greatly.

After the compilation rules were changed last year, mainland Chinese companies now account for nearly 77% of the total market value of Hong Kong, higher than the 57% ten years ago.

*Top ten weighted stocks of the Hang Seng Index as of 2022-10-24

This also means that Hong Kong’s stock market, externally, needs to look at the pace of interest rate hikes by the Federal Reserve, and internally, needs to look at the pace of economic recovery on the mainland.

Although the valuation of the Hong Kong stock market is now sufficiently cheap, and good assets have fallen enough, none of these are reasons to buy heavily now or to hold a large position. When the Hong Kong stock market will improve in the future still depends on:

1) When will the pace of interest rate hikes by the Federal Reserve slow down;

2) Whether the delisting risk of Chinese concept stocks can be resolved;

3) Whether internet companies can achieve results in embracing hard technology.

The market is always trading the future, a new era has begun, and the wheels of history are rolling forward.