Chinese tech stocks extend losses on Alibaba price downgrades while Xiaomi sinks on earnings concerns

  • Analysts from Deutsche Bank, Nomura and UOB have slashed Alibaba’s price targets following earnings disappointment while Xiaomi crashes on sales miss
  • Hang Seng Index has lost 4.3 per cent over six straight days on renewed selling while mainland Chinese traders flee from Hong Kong market

Chinese technology stocks in Hong Kong headed for the longest losing run in about five months, as more analysts dialled back their optimism on China’s tech sector amid rising competition and regulatory concerns.

The Hang Seng Tech Index retreated for a sixth day, losing 0.6 per cent at the local noon break on Wednesday. The main Hang Seng Index dropped less than 0.1 per cent to a six-week low, while China’s Shanghai Composite Index declined 0.1 per cent.

Smartphone maker Xiaomi sank 7 per cent after third-quarter sales missed consensus forecasts and earnings slumped amid a chip shortage. Alibaba Health Information Technology fell to a two-year low before its earnings report late Wednesday.

Mainland traders have turned net sellers this month as weak earnings from the likes of Alibaba, Tencent Holdings and peers stoked a new wave of selling. Investors worried about earnings setback and risk premiums amid regulatory crackdown and pressure to carve out profits to pay for China’s “common prosperity” agenda.

“China equities will remain a challenging market going into 2022, thanks to the ‘shared prosperity’ policy of Beijing,” said Jeffrey Halley, an analyst at Oanda. “I do not believe the process of repricing of China equities to reflect that policy is complete.”

Alibaba, the e-commerce group that owns this newspaper, retreated 1.4 per cent to another record-low of HK$131.10 as brokers including Deutsche Bank, Nomura and UOB trimmed their price targets for its US-listed securities.

Xiaomi tanked 7 per cent to HK$19.26 after posting an 84 per cent slump in third-quarter profit. Alibaba Health tumbled 7.2 per cent to HK$7.90 as JPMorgan cut its price target and lowered its recommendation to neutral from overweight, according to Bloomberg data.

On the flip side, Meituan added 0.6 per cent to HK$267 before its earnings release on Friday. Its third-quarter loss probably widened to 5.25 billion yuan (US$821.2 million). Kuaishou Technology, an unprofitable short-video platform operator, surged 7 per cent to HK$101.40 after quarterly revenue exceeded market consensus.

Among debutants, Jiangsu Haili Wind Power Equipment Technology surged 184 per cent from the initial public offering price to 172.30 yuan in Shenzhen. Wuxo Yoshioka Precision surged 225 per cent to 34.08 yuan in debut on the Beijing Stock Exchange.

Other major benchmarks in Asia-Pacific were generally weaker, with Japan’s Nikkei 225 and South Korea’s Kospi both heading south on concerns about earlier-than-expected unwinding of accommodative monetary policies by the Federal Reserve.

Author: Zhang Shidong, SCMP

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