Hong Kong stocks fell from a two-week high amid concerns about earnings slippage on Covid-19 lockdowns as XPeng, Kuaishou and Alibaba Group Holding prepare to issue their report cards this week. Beijing also stoked concerns about tighter social mobility controls.
The Hang Seng Index retreated 1.9 per cent to 20,327.28 at the local noon trading break, paring nearly half of last week’s 4.1 per cent rally. The Tech Index fell 3.1 per cent, while the Shanghai Composite Index retreated 0.5 per cent.
Alibaba Group Holding, the owner of this newspaper, declined 4.6 per cent to HK$84 while Kuaishou weakened 6.7 per cent to HK$66.50 and XPeng sank 8.9 per cent to HK88.60. All three expected to report their quarterly earnings this week. Meituan dropped 3.9 per cent to HK$166.30 while Li Ning slumped 7.8 per cent to HK$54.95.
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Earnings from Tencent Holdings and JD.com last week trailed market consensus by a wide margin, with the full brunt of lockdowns in Shanghai yet to be accounted for, prompting strategists to warn about potential for more setbacks in the market.
“Macro and consumption pressures may lead to downward revisions in corporate earnings” in the near term, according to Lim Soo Hai and William Fong, Asian equity strategists at Barings. “Sentiment may be poised to rebound once the market agrees that the end of the tunnel is nearing.”
Earnings pitfall awaits China tech stock traders as lockdown blunts spending
About 86 per cent of all Chinese onshore and offshore firms have reported their earnings for the March quarter, Goldman Sachs said in a May 20 report. Earnings rose an average of 2 per cent, versus consensus estimates of 9 per cent for MSCI China Index, according to data compiled by the US bank.
Meanwhile, authorities in Beijing told 3.1 million residents in Haidian district to work from home while some limited residential areas were locked down to control Covid-19 cases, fuelling worries about wider lockdown akin to measures imposed in Shanghai.
AAC Technologies slumped 6.3 per cent after index compiler Hang Seng Indexes Company decided to remove the stock from its main benchmark index from June 13 following a quarterly review.
Why the seventh week of Shanghai’s lockdown feels like a parallel universe
The four index additions advanced. Semiconductor Manufacturing International Corp rose 2.1 per cent while shipping firm Orient Overseas jumped 6 per cent. Car retailer Zhongsheng Group gained 0.4 per cent and aluminium manufacturer China Hongqiao Group surged 6.7 per cent.
Investors remain cautious as Beijing continues to offer selective stimulus to support the economy. Chinese banks cut the five-year loan prime rate on Friday to ease mortgage financing, after leaving it unchanged for two months. The one-year rate was earlier lowered in December and January.
Gains in major Asia-Pacific markets were muted on Monday. Japanese shares gained 0.6 per cent, while South Korean stocks added 0.1 per cent. The Australian stock benchmark was little changed.
More from South China Morning Post:
- Earnings pitfall awaits Meituan, Alibaba stock buyers as China lockdown blunts spending
- Chinese developer Jiayuan and subsidiary’s shares suspended after stock pledge to SHK Finance, Moody’s rating downgrade
- Hong Kong stock index tumbles the most in two weeks, weighed down by Tencent’s earnings miss and US rout
- Hong Kong tech stock rebound stalls as juggernauts from Meituan to JD.com slip
- SMIC, Orient Overseas included in Hang Seng Index revamp as compiler falls short of mid-2022 stocks expansion target
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