HONG KONG, March 31, 2026, 17:27 HKT
Hong Kong shares closed up on Tuesday, with the Hang Seng inching 37.35 points, or 0.15%, higher to 24,788.14. Still, the index just posted its worst monthly performance since January 2024. Investors juggled upbeat Chinese factory numbers alongside pressure from the Middle East conflict and rising energy prices.
Why does this matter? Hong Kong still stands as the primary offshore barometer for China risk. March made that clear, with sentiment turning on a dime. The Hang Seng lost 6.9% for the month. Tech shares fared worse—Hang Seng Tech Index slid close to 10%.
Even so, Hong Kong managed to hold up better than several of its neighbors. Japan’s Nikkei looked set for a rough March, on track for a nearly 13% tumble. South Korea’s Kospi gave up 19% for the month. Shanghai slipped 6.5%. The pullback from Asian stocks is wide and deep.
China’s official manufacturing PMI climbed to 50.4 in March, up from 49.0 in February and topping the 50.1 expected in a Reuters poll. That’s the highest level in a year. Still, Zhiwei Zhang, chief economist at Pinpoint Asset Management, cautioned, “The outlook for Q2 is unclear at this stage.” Reuters
“The market is increasingly worried about the risk of global growth slowdown and supply chain disruption,” Zhang said. Caution was evident in Tuesday’s session: coal and semiconductor stocks took the brunt of losses on the mainland, whereas Hong Kong-listed Chinese banks tacked on 1.4%. Reuters
The Hang Seng managed gains, but that didn’t tell the whole story. The Hang Seng China Enterprises Index dropped 0.3%, while the Hang Seng Tech Index lost 0.9%. Investors kept trimming positions in growth-focused stocks, despite the main benchmark closing higher.
Shanghai’s benchmark slipped 0.8%, according to LSEG data, while the Nikkei 225 dropped 1.58% on Tuesday. Asian equities ex-Japan faced their steepest monthly slide since March 2020, with Brent crude still set for a record monthly climb.
Markets have snapped into “fear mode” as investors pare back risk, according to Vishnu Varathan, Mizuho’s head of macro research for Asia ex-Japan. Thomas Mathews, who leads Asia-Pacific markets at Capital Economics, flagged inflation as the front-and-center concern right now. Still, he warned, if oil prices remain elevated, questions around growth could quickly take on a much bigger role in market conversations. Reuters
But that relative resilience can unravel fast. Should oil prices remain elevated or the chaos near the Strait of Hormuz persist, input costs climb again, and suddenly the market’s focus swings: inflation concerns give way to growth anxiety. That’s the sort of shift that tends to weigh more heavily on Chinese exporters and Hong Kong-listed cyclicals as the new quarter gets underway.
HSBC stuck with its overweight call on China in a note dated March 31, pointing to the market’s domestic investor base and steady currency as factors that could cushion shocks. J.P. Morgan, for its part, tagged China as its top pick in the region this month, highlighting limited reliance on Gulf energy and greater policy leeway. For Hong Kong, the route forward looks tight: stronger China numbers might help the mood, but oil prices and conflict are still driving the narrative.
