Alibaba, send Hong Kong stocks tumbling as Shanghai lockdown, economic report heighten China slowdown concerns

  • The Hang Seng Index slips as Alibaba, and other tech leaders surrender gains from two days of rebound
  • Shanghai reported a record number of Covid-19 cases even amid a lockdown around the financial hub; latest PMI services report shows a major slump in March

Hong Kong stocks fell by the most in a week after Shanghai reported a record number of Covid-19 cases amid widening lockdown around the financial hub, while a private report showed China’s economic activity cooled further last month.

The Hang Seng Index tumbled 1.4 per cent to 22,119.10 at 11am local time, halting a two-day advance, while the Tech Index slipped 3.2 per cent. The Shanghai Composite Index retreated 0.2 per cent as the market reopened after a two-day public holiday. slumped 4.5 per cent to HK$235.60 while Alibaba Group Holding retreated 4.1 per cent to HK$109.10. Meituan and NetEase lost at least 2 per cent while Sunny Optical and Techtronic Industries slid more than 6 per cent.

Shanghai logged a record 13,354 new Covid-19 infections on Tuesday, boosting the national caseload to its highest since the first outbreak in early 2020 as the city’s 25 million residents face an extended lockdown. Shanghai’s economy is about 4 per cent of the size of China’s gross domestic product.

Investors “are afraid of how the lockdowns could further impact the economy, given that many are already expecting China to fall short of their GDP target,” said Paul Pong Po-lam, managing director of Pegasus Fund Managers in Hong Kong.

The Caixin China PMI services index fell to 42 in March from 50.2 in February, the lowest since the onset of the pandemic in February 2020, according to a report on Wednesday. That is also worse than the consensus of 49.7 among economists tracked by Bloomberg. A reading below 50 indicates contraction in activity.

The Hang Seng Index’s 66 members lost about US$180 billion in market value last quarter, caused by heightened delisting risks involving Chinese companies traded in the US and “secondary sanctions” related to Russia’s invasion of Ukraine.

Despite today’s setback, the Hang Seng Index has rebounded by almost 20 per cent from its low in mid-March. Strategists at Goldman Sachs and Standard Chartered’s wealth management arm said Chinese equities, using the MSCI China benchmark, could outperform global peers.

Zhongfu Shenying Carbon Fiber Company jumped 20 per cent on its first day of trading in Shanghai.

Most Asian markets retreated on Wednesday, mirroring global stocks after hawkish Fed comments on a rapid balance sheet runoff. Japanese shares retreated 1.8 per cent, while South Korean and Australian stocks fell at least 0.5 per cent each.

Author: Cheryl Heng, SCMP

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