Alibaba, Tencent lead tech retreat amid capital flight concerns as traders step up bets on Fed tightening

  • Traders step up bets on a full-point increase in Fed fund rate in meetings through June, after US consumer prices rose by the most in four decades
  • WuXi Biologics’s nightmare run continues as the slump exceeds 30 per cent this week after being put on ‘unverified list’

Chinese technology stocks fell from a two-week high in Hong Kong, tracking losses in global equities, after a report showing US inflation at four-decade high prompted traders to step up bets on faster rate increases by the Federal Reserve.

The Hang Seng Tech Index dropped 0.5 per cent at the local noon trading break, trimming a weekly gain. A rally in property stocks helped reverse an earlier drop in the Hang Seng Index as local media reported that China has loosened rules on the use of home presale funds to ease a cash crunch in the industry.

The Shanghai Composite Index rose 0.3 per cent after data from the central bank showed that commercial lenders offered a record amount of loans in January, igniting the hope that a spurt in credit growth will stem a slowdown in the economy.

Tencent Holdings lost almost 1 per cent while Alibaba Group Holding slipped 0.2 per cent to snap a two-day winning run. NetEase and Meituan declined by at least 1.1 per cent. WuXi Biologics extended a nightmarish run, taking the slump past 30 per cent this week.

US consumer prices rose 7.5 per cent in January, the government said on Thursday, stoking a rout in both equity and bond markets. Traders have priced in an 80 per cent probability of a 50-basis-point increase in March, with an additional 25-basis point hike for May and June, according to forward Fed fund rates.

US Treasury yields climbed to the highest levels in two years, an outcome that could strengthen the US dollar. China Asset Management (Hong Kong) highlighted capital outflows from emerging markets as one of the main risks to local stock in 2022.

“The risk to the current business cycle is elevated,” said David Chao, a strategist at Invesco in Hong Kong. “The economy is likely to slow meaningfully as the Fed tightens policy” and volatility persists amid policy uncertainty, he added.

WuXi Biologics dropped for a fourth day, sinking 4.7 per cent as the worst performer among Hang Seng Index members as the biotech firm attempts to remove itself from the US Department of Commerce’s so-called “unverified list.”

Chinese property developers trading in Hong Kong extended their gains after the 21st Century Business Herald reported that the new rule governing escrow funds will allow developers to use the proceeds more flexibly. China Overseas Land & Investment and Country Garden Holdings rallied at least 1.6 per cent, while Longfor Group Holdings added 1.8 per cent.

China’s biggest chip maker SMIC gained 3.8 per cent after fourth-quarter profit jumped 173 per cent from a year earlier. Its Shanghai-listed shares added 1.6 per cent. MGM China added 2.8 per cent after the Macau casino operator’s results beat analysts’ projections.

Author: Zhang Shidong, SCMP

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