Global financial stability shaken as markets decline

[WORLD] Markets in Hong Kong and mainland China declined on Monday as investor sentiment weakened following a downgrade of the United States’ sovereign credit rating and mixed economic signals from China.

Moody’s recent decision to cut the US credit rating from AAA to Aa1 has stirred concerns over global financial market stability. The move marks a departure from the long-standing consensus among major credit agencies that had consistently rated US Treasuries at the highest level. The downgrade is expected to push up US borrowing costs and may complicate efforts to stabilize the American economy. Analysts warn that this could fuel increased volatility across markets and prompt major foreign holders of US debt—including China—to reconsider their holdings of dollar-denominated assets, potentially disrupting global capital flows.

As of 11:24 a.m. local time, the Hang Seng Index was down 0.4 per cent to 23,264.609, while the Hang Seng Tech Index slipped 0.9 per cent. On the mainland, the CSI 300 Index, which tracks leading stocks in Shanghai and Shenzhen, also dropped 0.4 per cent.

China's own economic headwinds are compounding the negative sentiment. Despite the lifting of pandemic-era restrictions, the nation continues to grapple with entrenched structural issues such as a cooling property market, industrial overcapacity, and demographic pressures from an aging population. Economic momentum has remained tepid, raising fears of a deeper slowdown heading into 2025. The success of Beijing’s latest stimulus efforts will be critical in determining whether market confidence can be restored.

Among major decliners, Alibaba Group Holding fell 3.7 per cent to HK$118.90, extending losses after reporting weaker-than-expected quarterly results last week. Sunny Optical Technology Group dropped 3.5 per cent to HK$63.50, and Kuaishou Technology shed 2.9 per cent to HK$49.45. Geely Automobile Holdings retreated 2.7 per cent to HK$19.20.

Losses were broad-based across sectors, reflecting ongoing investor concerns. Alibaba's decline underscores persistent anxieties in the tech sector, while the pullback in Sunny Optical and Kuaishou points to continued pressure on companies tied to mobile technology. Geely’s slump, meanwhile, highlights difficulties facing automakers amid shifting consumer trends and macroeconomic uncertainty.