Alibaba, tech peers send Hang Seng to six-week low while mainland traders flee on earnings jitters

  • Alibaba drops to an all-time low and Kuaishou slips before its earnings report as stock bulls pay the price for mistimed optimism
  • More than US$160 billion has been erased from Chinese tech stocks traded in Hong Kong and New York over the past week

Hong Kong stocks dropped to the lowest level in six weeks as selling by mainland China funds accelerated following disappointing earnings from technology juggernauts.

The Hang Seng Index slumped 1.1 per cent to 24,674.40 at the local noon break on Tuesday, heading for the lowest close since October 6. The Hang Seng Tech Index slid 1.6 per cent, while the Shanghai Composite Index climbed 0.4 per cent.

Mainland investors, who contribute to more than a fifth of daily transactions, have taken their money off the table. They have sold HK$9.3 billion (US$1.2 billion) worth of Hong Kong stocks so far this month via the Stock Connect link. If sustained, that would be the first monthly outflows since August, according to exchange data.

“To reverse the downtrend, we need to see signs of bottoming in regulatory crackdowns and China’s economic slowdown, as well as an easing in global inflation,” said Wei Wei, an analyst at Ping An Securities. “We have had none of these elements at the moment.”

Tech companies are under pressure to deliver after big earnings misses by Alibaba Group Holding and Bilibili. Kuaishou Technology, the biggest weight on the Hang Seng Tech Index, fell before its report later Tuesday. Alibaba, the owner of this newspaper, sank 3.3 per cent to a record low.

The past week has been chastening for investors who deemed the worst for Chinese technology companies has passed. A slide in earnings at Alibaba triggered another bout of sell-off, lopping US$163 billion off such stocks listed in Hong Kong and New York.

Earnings released so far by 22 companies on the Hang Seng Index have trailed the analysts’ estimates by 2.9 per cent, Bloomberg data showed. The index member outperformed the market by 1.6 per cent in the second quarter.

Wuxi Biologics and Anta Sports Products were the worst performers on the Hang Seng Index, falling by at least 4 per cent. Kuaishou, the biggest constituent on the Hang Seng Tech Index, dropped 1.1 per cent. The short-video sharing platform operator probably incurred a loss of 8.6 billion yuan in the third quarter.

Meituan sank 3 per cent, heading for a fifth day of loss. China’s biggest on-demand service delivery firm may say on Friday that quarterly loss widened to 5.25 billion yuan from the previous three-month period.

Other major markets in Asia all retreated except Australia, taking cues from an overnight decline in US equities. The reappointment of Jerome Powell as Fed chair fanned speculation about faster tapering, sending Treasury yields higher.

Author: Zhang Shidong, SCMP

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