Hong Kong stocks are closing out a rough year and the outlook for 2019 remains largely negative, according to analysts and investors.
Headwinds from a weakening economy in China, the Beijing-Washington trade war, concerns about signs of emerging U.S. weakness and an expected slowdown in local initial public offerings after a banner 2018 are seen as likely to weigh on the market.
The benchmark Hang Seng Index closed Friday at 26,094.79, down about 13 percent for the year as the end of 2018 approaches. It has slumped some 22 percent from its peak of 33,484.08 on Jan. 29.
"I would say it's between a rock and a hard place," Hao Hong, managing director and head of research at BOCOM International in Hong Kong, told CNBC earlier this month about the outlook for the market.
Hong cited the expectation of a broad slowdown in China's economy during the first half combined with volatility on Wall Street in the U.S., where less aggressive interest rate hikes by the Federal Reserve underscore worries growth in the world's largest economy is waning.
Hong said the Hang Seng is clearly in the process of finding a bottom, but added: "I don't think people should be hoping for a V-shaped rebound in the market."
Hong Kong, a semi-autonomous former British colony over which Beijing resumed control in 1997, is a major trade and financial services hub vulnerable to the whims of larger economies, given its proximity to China and the Hong Kong dollar's peg to the U.S. currency.
"Hong Kong ... is vulnerable to further escalating U.S.-China trade tensions, possible disorderly tightening of global financial conditions, slower-than-expected growth in Mainland China, and a sharp housing market correction," the International Monetary Fund said in a statement last week at the conclusion of regular consultations with local authorities.
Citi, in a report dated Dec. 5, said it expects Hong Kong banks to underperform the broader market next year as weak credit demand suppresses earnings and on concern over potential for capital outflows.
Ronald Wan, non-executive chairman at Partners Financial Holdings, suggested that a breakthrough in the tariff conflict in the form of China opening up key business sectors to meet U.S. demands is unlikely, while China's economic growth is set to slow.
"I think the market will be even more challenging," he said on Dec. 6 of next year's outlook for Hong Kong.