Alibaba, Tencent drag Hong Kong stocks to weekly loss as China douses bullish easing bets while Zhihu slumps in debut

  • China offers no respite for market bulls after the central bank withheld its easing firepower and President Xi downplayed Covid-19 impact on the economy
  • Zhihu loses a quarter of its market value as stock plunges in trading debut amid lingering concerns of delisting from US bourses

Hong Kong stocks tumbled, set for the biggest weekly drop in six, after China indicated no hurry to reflate its faltering economy. Zhihu lost a quarter of its market value as US delisting concerns marred its trading debut.

The Hang Seng Index slipped 0.6 per cent to a five-week low of 20,567.95 as of noon trading break. The index fell every day this week, bringing the setback to 4.4 per cent. The Tech Index dropped 0.9 per cent, while the Shanghai Composite Index lost 0.1 per cent.

Tencent declined 2.8 per cent to HK$338.20, while Alibaba Group Holding dropped 2.2 per cent to HK$85.95, pacing losses in Friday trading. Galaxy Entertainment and Geely Automobile both weakened more than 2 per cent while JD.com tumbled 0.8 per cent.

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China’s central bank doused bullish bets on policy easing after offering a token 25-basis point cut in banks’ reserve ratio last week, the smallest reduction in history. Commercial banks kept their lending rates unchanged, and President Xi Jinping offered no respite at the Boao Forum on Thursday, saying the economy remains resilient in the face of losses from Covid-19 lockdowns.

“Hong Kong stocks are just unattractive, no matter how you imagine it,” Stanley Chik, research director at Bright Smart Securities, said in a note on Friday. “China’s economic outlook has become uncertain.”

The 66 Hang Seng Index members have lost more than US$130 billion in market value this week and US$368 billion since the start of the year. Investors lapping up stocks on China has not delivered the full suite of stimulus despite its pledge last month to support the economy and markets.

Even so, China’s securities watchdog on Thursday called on institutional investors to buy more domestic stocks, saying the long-term growth momentum was still intact. It was the third time the regulator has chimed in to shore up confidence in the market.

Separately, Zhihu sank as much as 27 per cent to HK$23.45 on its first day of trading, after the Tencent-backed firm completed a US$106 million listing deal. The US market regulator on Thursday added the Chinese knowledge-sharing platform with 16 other firms to a delisting blacklist over access to their audit papers.

Elsewhere, Nongfu Spring slipped 1.4 per cent to HK$42.0. Goldman Sachs downgraded the stock to neutral from a buy on Thursday, according to Bloomberg data, and lowered its 12-month price target to HK$46 from HK$48.

Bucking the trend, China Merchants Bank added 2.6 per cent to HK$52.10. The lender’s first-quarter net income probably increased 11.7 per cent from a year ago, according to analysts tracked by Bloomberg, before its report card on Friday. Its shares slumped this week after the unexplained removal of its president on Monday.

Four mainland firms started trading for the first time. Guangdong Cellwise Microelectronics sank 26 per cent in Shanghai, while Suzhou Novosense Microelectronics jumped 8 per cent. In Shenzhen, Qingyan Environmental Technology surged 85 per cent and Suzhou Alton Electrical & Mechanical Industry soared 26 per cent.

Author: Cheryl Heng, SCMP

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