Hong Kong stock market rebound stalls as Chinese tech shares from Meituan to NetEase lead declines
- Stocks dropped from a two-week high, as a rally powered by regulatory support and an improved outlook for China’s growth took a pause
- Traders are reassessing whether a recovery which has seen the market rise 11 per cent from a six-year low in March is sustainable
Hong Kong stocks dropped from a two-week high, as traders weighed the sustainability of a rally powered by regulatory support and an improved outlook for China’s growth.
The Hang Seng Index lost 0.6 per cent to 20,471.54 at the noon break on Wednesday, snapping a three-day, 6.3 per cent gain. The Hang Seng Tech Index sank 1.7 per cent, while China’s Shanghai Composite Index retreated 0.4 per cent.
Technology stocks led the losses on the local market, surrendering some of their gains of recent days. Meituan, Alibaba Group Holding and JD.com all fell by more than 2 per cent.
Investors have begun to reassess whether a recovery which has seen the market rise 11 per cent from a six-year low in March is excessive relative to the regulatory outlook.
Confidence in China’s tech sector, which accounts for the biggest weighting on Hong Kong’s benchmark index, has received a boost recently. JPMorgan Chase upgraded its rating on China’s biggest technology stocks from Alibaba Group Holding to Tencent Holdings this week, and a political advisory meeting attended by Vice-Premier Liu He on Tuesday reaffirmed the importance of the digital economy.
The Chinese People’s Political Consultative Conference (CPPCC) meeting saw members pledge to support the listings of digital platforms both at home and aboard. While it was seen by some analysts as a sign of a softening of the year-long regulatory onslaught, some said the gathering had simply rehashed policymakers’ earlier promises and was short on meaningful details.
“Relaxation may be, but a reversal of the trend of tightening regulation is unlikely,” said Redmond Wong, a strategist at Saxo Markets. “We suspect that the CPPCC, which is purely consultative, will not be the platform for conveying important policy messages.”
Meanwhile, traders are also keeping a close eye on whether there will be a cut in China’s loan prime rate on Friday. The key benchmark lending rate has been left unchanged for the past two months. A further reduction in the interest rate is something investors are keen to see before they turn bullish on stocks.
Among the biggest decliners on Wednesday morning, Meituan slid 2.8 per cent to HK$168.90. Alibaba, which owns the Post, fell by the same amount to HK$88.05 and JD.com eased 2.5 per cent to HK$209.40. The trio jumped at least 6.2 per cent on Tuesday.
Other markets in Asia all rose on Wednesday, tracking an overnight rally that sent US stocks to their highest level in a week after strong retail sales data. Still, Treasuries declined on the back of more hawkish comments by the Federal Reserve, as it stressed the urgency of reining in inflation.
Author: Zhang Shidong, SCMP