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Hong Kong stocks: Hang Seng falls below 19,000 tripped by Alibaba, NetEase; hawkish US Fed sours risk appetite

South China Morning Post
·3-min read

Hong Kong stocks declined for the third straight day, with the benchmark breaching the 19,000 psychological support, weighted down by tech leader Alibaba and NetEase. Sentiment also weakened after hawkish comments from US Federal Reserve officials.

The Hang Seng Index lost 1.7 per cent to 18,868.71 at the closing of Thursday trading, its lowest level in two weeks. The Tech Index lost 2.4 per cent while the Shanghai Composite Index weakened 1.3 per cent.

All but seven out of the 82 index members declined. Gaming firm NetEase lost 7.8 per cent to HK$141.50 and smartphone maker Xiaomi lost 2.6 per cent to HK$18.94 before their earnings release. Li Auto dropped 4.1 per cent to HK$78.90, leading losses among EV shares.

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E-commerce behemoth Alibaba tumbled 5.2 per cent to HK$78.65, the biggest drop in over three months, after Bloomberg reported quoting unidentified sources that the company plans to issue US$5 billion convertible bonds to fund growth. Such issuance has the potential to dilute earnings, analysts say.

Peer JD.com lost 4.1 per cent to HK$123.70. Rival PDD's 131 per cent surge in revenue last quarter and market share gains also pressured the duo amid intensive competition.

The logo of Temu, an e-commerce platform owned by PDD Holdings, is seen on a mobile phone displayed in front of its website, in this illustration picture taken April 26, 2023. Photo: Reuters alt=The logo of Temu, an e-commerce platform owned by PDD Holdings, is seen on a mobile phone displayed in front of its website, in this illustration picture taken April 26, 2023. Photo: Reuters>

"The Hong Kong market is currently experiencing a correction, while the local market sentiment is approaching a low point," analysts at Horizon Insights, an independent research firm, said in a note on Wednesday. The market now needs to see stronger economic readings for May to find reasons to continue the rally, they added.

The city's benchmark index has declined 3.5 per cent this week, on track to post the worst weekly performance since January. The stimulus-induced optimism waned with technical indicators signalling the four-week rally may be stretched, while uneven corporate profits recovery also prompted some profit-taking.

Hong Kong's earnings growth has lagged the Asia region's 13 per cent average in the first quarter, while growth in mainland China also came in weak, with nearly half of the companies reporting below expectation earnings, according to data compiled by HSBC.

"Chinese corporate profits have failed to recover despite the moderate recovery in mainland China's economic output over the past 12 months," Arthur Budaghyan, chief emerging market and China strategist at BCA Research said in a note. The recovery will continue to struggle as deflation pressures persist and investors should be cautious in chasing the rally, he added.

Local developers stocks retreated with Henderson Land losing 2.4 per cent to HK$26.15 and New World Development declining 4.9 per cent to HK$9.45, after the US Federal Reserve minutes were more hawkish than expected. Hong Kong's interest rates move in lockstep with the US as the local currency is pegged to the US dollar.

US central bank officials were disappointed with the recent inflation data and believed "disinflation would likely take longer than previously thought", the latest Fed minutes showed.

JPMorgan Chase said China's property downturn is yet to reverse its fortunes as the unprecedented bailout package introduced last week may be insufficient.

Other key Asian markets were mixed. Australia's S&P/ASX 200 dropped 0.5 per cent, whlie South Korea's Kospi declined 0.1 per cent and Japan's Nikkei 225 added 1.3 per cent.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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