Sell-offs in Hong Kong stocks deepened on Thursday, with the benchmark gauge capping its steepest decline in seven months, as hopes faded that Beijing would implement more meaningful stimulus policies, following latest economic data indicating the annual growth target was within reach.
The Hang Seng Index sank 3 per cent to 22,934.68 at the close, its worst single-day performance since March 23. The Hang Seng Tech Index plunged 5 per cent, finishing at a level not seen in two years.
Tencent Holdings and Alibaba Group Holding, the most valuable constituents on the city’s benchmark gauge, fell at least 2.9 per cent, as China’s sluggish consumer spending dimmed the earnings outlook of the nation’s biggest internet platforms that remain reliant on e-commerce as their major source of revenue.
Contemporary Amperex Technology Limited (CATL) extended its decline spurred by its interim report showing a slowdown in profit growth. Artificial intelligence model developer MiniMax fell below its initial public offering price for the first time since its debut in January on jitters about stiffer competition.
The Chinese mainland’s market fared no better, as the CSI 300 Index slid 1.8 per cent, technically entering a bear market after a 20 per cent pullback from a high on June 22. The chip-centric Star Market 50 gauge retreated 2.8 per cent.
Stock traders accelerated the unwinding of equity positions after Wall Street firms made the call that China would withhold major stimulus policies this year, compounding growth concerns.
The nation’s economy grew by 4.6 per cent in the first three quarters, slightly above the low end of the government’s goal for the year. While overall growth held up, the divergence of different parts of the economy widened last month, with domestic demand languishing and exports remaining robust. Beijing’s piecemeal stimulus measures disappointed investors, who said that a recent mortgage interest subsidy programme was intended only for buyers of low-priced homes in smaller cities.
“In China and Hong Kong, weak domestic demand, limited policy support and continued capital outflows weigh on sentiment,” said Kelly Chung, chief investment officer for multi-assets at Value Partners. “China’s limited stimulus measures disappointed market expectations. Investors have consequently largely priced out the possibility of further near-term stimulus. Near-term market sentiment is likely to remain weak.”
A recent speech by the chief of the China Securities Regulatory Commission also fell short of investors’ expectations, concentrating on the approach to fostering long-term market stability rather than any immediate rescue measures that could prop up stocks.
The pullback in mainland Chinese and Hong Kong stocks was part of a global unravelling of the AI trade, in which investors have started to question the rationale for huge spending on data-centre buildouts and demand solid evidence of justified returns. Elevated US Treasury yields also reined in risk appetite by compressing equity valuations.
“Hong Kong stocks aren’t getting much support fundamentally at this level, amid persistent overseas disruptions,” said Chen Meng, an analyst at Soochow Securities. “Even if there’s a rebound, the upside will be limited and caution should be exercised over the Hong Kong market.”
Tencent Holdings, which has an 8.05 per cent weighting on the Hang Seng Index as its second-largest constituent, lost 2.9 per cent to HK$382.40. Alibaba, the third biggest with 7.96 per cent, plunged 6.1 per cent to HK$97.35. Alibaba is the owner of the South China Morning Post.
CATL tumbled 7.2 per cent to HK$338.40, extending an 11 per cent decline a day earlier after third-quarter profit growth for the lithium-ion battery maker more than halved from the preceding three-month period.
MiniMax, which is a member of the Hang Seng Tech Index, slumped 6.5 per cent to HK$160.70, breaching its offer price of HK$165 in its initial public offering.
Elsewhere, Chinese toymaker Bloks Group tumbled 21 per cent to HK$54.60 after its chairman sold a 1.6 per cent stake for HK$250 million (US$31.9 million), a reduction that investors suspected was linked to the purpose of paying a new income tax levied by Beijing on offshore assets held by the wealthy. -- SOUTH CHINA MORNING POST
