Alibaba, Tencent drag Hang Seng to 2-week low as regulatory risks cloud earnings outlook while banks, developers weaken on Covid fallout

  • Concerns about tightening regulation and corporate earnings are keeping investor appetite in check after the latest bout involving Meituan
  • Banks weaken after branch closures in the city widened to 37 per cent of network amid Covid-19 infections

Hong Kong stocks fell to a two-week low amid concerns new regulations will hurt the outlook for corporate earnings of Chinese tech stocks, while traders await earnings reports from the likes of HSBC and Alibaba Group Holding later this week.

The Hang Seng Index retreated 0.7 per cent to 24,157.14 at midday trading break. The Tech Index declined 1.4 per cent, while the Shanghai Composite Index lost 0.2 per cent. Alibaba tumbled 3.1 per cent while Tencent slipped 3.2 per cent. Bourse operator Hong Kong Exchanges & Clearing lost 0.6 per cent.

Meituan plunged 15 per cent on Friday after China ordered food-delivery platform operators to slash fees to help businesses amid the Covid-19 crisis, renewing fears of tightening regulation. The stock retreated 1.5 per cent today, surrendering an earlier 3.2 per cent rebound.

“Major brokerage firms will continue to downgrade earnings forecasts and cut price targets for particularly tech stocks, which will weigh down on the Hang Seng Index,” said Castor Pang, head of research at investment services firm Core Pacific-Yamaichi. Investors have continued to sell tech stocks, he added.

Risk on financial markets, social sector, antitrust and data security remain elevated, according to gauges tracked by Goldman Sachs.

HSBC, Alibaba, NetEase and HKEX are among big companies issuing their earnings reports this week. Analysts have trimmed earnings for Hang Seng blue-chip companies as much as 15 per cent over the past eight months, according to Bloomberg data.

Elsewhere, banks operating in Hong Kong declined as branch closures reached 37 per cent of the citywide network amid Covid-19 infections. China Construction Bank dropped 0.3 per cent while HSBC slipped 0.1 per cent. Some brokerages also slipped.

Property developers slumped after offering some of their properties to help the Hong Kong government fight the Covid-19 crisis. Longfor Group retreated 3 per cent and Henderson Land lost 2.3 per cent. Wharf REIC and New World Development dropped at least 1.4 per cent.

Stocks weakened even as US and Russian leaders agreed on Sunday to a proposed summit to defuse tensions amid concerns Russia will invade Ukraine. Most markets in Asia-Pacific declined as benchmarks in South Korea and Japan lost 0.3 per cent.

Jiangyin Pivot Automotive Products jumped 18 per cent on its first day of trading in Shenzhen.

Author: Cheryl Heng, SCMP

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