Alibaba, Meituan, lead tech rout in Hong Kong on inflation, rate jitters while China hardens zero-Covid stance

  • Tech stocks sink by 5 per cent at noon trading break as investors shun riskier assets following an overnight sell-off in US equities
  • ‘This is a major bear market’ as the US, Europe and Chinese economies face mounting growth risks, ACY Securities says

Stocks slumped in Hong Kong and mainland China by the most in two weeks as the threat of global inflation and speedy interest-rate increases prompted traders to dump riskier assets, with US equities suffering more than US$2 trillion rout overnight.

The Hang Seng Index slid 3.6 per cent to 20,051.61 at the local noon trading break, set for the biggest one-day loss since April 25. The Tech Index tumbled 5 per cent while the Shanghai Composite Index lost 2.3 per cent to slip below the 3,000-point threshold for the second time since June 2020.

Alibaba Group Holding, the owner of this newspaper, slumped by 6.5 per cent to HK$90.45. Meituan sank 5.2 per cent to HK$156.10, while Tencent retreated 4.5 per cent to HK$349.80. and Country Garden lost 6.7 per cent and 9.5 per cent, respectively.

Today’s slide extended the losses in the Hang Seng Index to 18 per cent this year, wiping out more than US$327 billion of market value. Another US$3 trillion has been erased from the Shanghai and Shenzhen bourses amid mounting economic toll from lockdowns under China’s zero-Covid policy.

“This is a major bear market,” said Clifford Bennett, chief economist at ACY Securities in Sydney.”The US economy is in diabolical shape, Europe is at war. And Shanghai, the world’s biggest port, is in extended lockdown. This is truly catastrophic.”

The S&P 500 Index sank 3.6 per cent to erase US$1.3 trillion of market value. It was only the fifth time the market has sold off more than 3.5 per cent since the depth of Covid-19 pandemic in March 2020, according to Bloomberg data. The Nasdaq Composite Index plunged 5 per cent.

China has reaffirmed its stance on zero-Covid policy, saying it will stand the test of time. That, despite reports this week showing a slide in manufacturing and services indicators. President Xi Jinping has pledged to fight any attempt to “distort, question and challenge” its policies in handling the outbreak in Shanghai, he said in a Politburo meeting on Thursday.

In Shanghai, strict lockdown measures remain intact as the city reported 4,269 new cases in the preceding 24 hours, officials said on Friday, delaying a resumption in production activity and clouding corporate earnings outlook.

This week’s sell-off reflects underlying jitters and confusion amid wild swings in stock prices. Investors are worried about the Federal Reserve rushing to tighten its policy to overcome the fastest inflation in four decades, after it lifted the fed funds rate by 50 basis points in the most aggressive hike since 2000.

The Hong Kong Monetary Authority also raised its base rate by the same quantum to 1.25 per cent on Thursday, with policy makers cautioning consumers about the cost of borrowing. The local economy faces recession risks after contracting deeper than expected last quarter.

Global growth stocks face “earnings downgrades”, Minsheng Securities said in a report on Friday. “Inflation may enter the second stage of acceleration and China’s domestic inflation may be ignited at any time,” it added.

Bestlink Technologies, an information and communication technology service provider based in Nanjing in the eastern Jiangsu province, surged 44 per cent in its market debut in Shenzhen.

Elsewhere, South Korean and Australian stock retreated 1.2 per cent and 2.4 per cent, respectively while Japanese equities gained 0.9 per cent.

Authors: Cheryl Heng, Ann Cao, SCMP

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