Chinese tech stocks sink to new low in Hong Kong on sanction risks while Fed quickens move to trim policy stimulus

  • Hang Seng Tech Index hits the lowest level since July 2020 inception amid selling pressure from reported US sanctions while the Fed plans a faster exit from stimulus
  • Chinese developers rally on speculation authorities will ease funding access to alleviate a liquidity crunch

Hong Kong stocks slumped for a fifth day as tech stocks succumbed to heightened concerns about additional US sanctions. The Federal Reserve also announced a quicker plan to withdraw its monetary stimulus, fanning higher borrowing costs.

The Hang Seng Index retreated 0.8 per cent to 23,231.48 at noon trading break, adding to more than a 4 per cent loss in the current losing stretch. The Tech Index dropped 1.4 per cent to the lowest level since its July 2020 inception.

The Shanghai Composite Index rose 0.3 per cent.

JD.com, Alibaba Group Holding and Tencent Holdings paced losses, tracking overnight declines in US-listed Chinese tech peers after reports saying the US government will this week sanction more Chinese firms, and barred US investors from trading or owning undisclosed biotech firms.

“Investors are feeling jittery about potential US sanctions, its repercussion on Chinese tech stocks is profound,” said Louis Tse Ming-kwong, managing director of Wealthy Securities, a local brokerage.

The city’s Tech Index has now lost about 5 per cent in December, set for a fifth month of slump in six, worsened by US delisting risks. Almost US$700 billion of market value has been wiped out since the end of June, when Chinese authorities expanded its crackdown with a cybersecurity probe on Didi Global.

Beaten-down Chinese tech stocks are now at attractive valuations with policy conditions priced in for investors who can look beyond short term volatility, according to Lombard Odier Investment Managers, part of a Swiss private banking group.

Elsewhere, property stocks rallied, especially among heavily indebted firms, amid speculation China will ease funding access to alleviate a liquidity crunch. Sunac China and China Aoyuan surged by more than 5.6 per cent. An index tracking 33 developers rose 1.3 per cent, the most in a week, according to Bloomberg data.

Meanwhile, the US central bank said it will double the pace of bond tapering to US$30 billion a month after its final 2021 policy meeting on Wednesday. It also projected three rate increases of 25-basis point each in 2022, three hikes in 2023 and two in 2024.

In response, the Hong Kong Monetary Authority said local money markets continue to operate smoothly, with ample liquidity in the banking system. It will maintain stability in accordance with current peg system, it added.

Two firms started trading for the first time in Hong Kong. Shanghai Conant Optical, a resin spectacle lens manufacturer, gained 1.4 per cent while online game developer Qingci Games slumped 5.4 per cent.

Major Asian markets were mixed. Japanese shares rose 1.9 per cent while equities in South Korea gained 0.2 per cent. In Australia, stocks retreated by 0.6 per cent.

Author: Cheryl Heng, SCMP

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