(Bloomberg) -- Hong Kong’s benchmark stock index fell to the brink of a correction Wednesday as growing geopolitical concerns and doubts over the strength of China’s economy spurred a rethink on the market’s outlook.

The Hang Seng Index closed down 0.5%, taking its loss since a Jan. 27 peak to near 10%. A sharp three-month surge in the measure has started to reverse in February as investors sought more evidence that the economy’s recovery is on sure footing. Tech and property shares have led the latest decline. 

Investors are now debating whether China’s reopening rally can resume after the pullback. Key focus is on the National People’s Congress in March, where the cabinet is expected to unveil a new growth target after the economy expanded just 3% last year. There are also concerns about renewed competition among Chinese e-commerce giants, which may eat into corporate margins just as a years-long crackdown nears an end. 

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“It’s reasonable for the market to consolidate after the strong rally from October, and news of stepped-up competitive intensity in e-commerce provides a reason to take profit,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Investors will probably gain better visibility on the recovery, and hopefully confidence, as we go into the earnings season this week.”

Traders’ reaction following the Hong Kong government’s budget announcement was muted. The city will give out spending vouchers and offer a salaries tax rebate, but each of those programs will be smaller in scope than last year’s. Tax rates will also be lowered for first-time buyers of some properties. 

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The Hang Seng China Enterprises Index, which fell into a correction earlier this month, fell 1.3%. A gauge of Chinese tech shares trading in the city slumped 1.4%. On the mainland, the CSI 300 benchmark slid 0.9%. 

The current earnings season is being scrutinized for business impact from China’s Covid Zero exit. Figures on retail sales and industrial production for the first two months of 2023 are due mid-March, with data so far showing a mixed picture amid tepid sales of cars and homes.   

--With assistance from Ishika Mookerjee.

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