Hong Kong stocks approach 21-month low as tech adds to US$71 billion sell-off while Omicron variant forces city to tighten Covid-19 rules

  • The Hang Seng Index has lost 2.4 per cent in the first week of trading in 2022, set for the worst start to a year since 2005
  • A sell-off in Chinese tech stocks erased US$71 billion from the market value of Hang Seng Tech Index members on Wednesday

Hong Kong’s benchmark stock index tumbled close to a 21-month low, following a tumult in global markets amid concerns about higher borrowing costs. Losses in technology companies deepened as the city reimposed stricter measures to stem Covid-19 cases.

The Hang Seng Index slipped 0.4 per cent to 22,824.60 at the noon trading break. The Hang Seng Tech Index dropped 0.6 per cent while the Hang Seng China Enterprises Index retraced 0.4 per cent to 7,984.28.

The city’s benchmark stock index has lost 2.4 per cent in the opening week of trading, on course for the worst start to a year since 2005. A sell-off in tech stocks, triggered by a Tencent’s divestment in Southeast Asia’s largest company this week, erased US$71 billion from the 30 members of the Hang Seng Tech Index on Wednesday.

“There is no sign of a reversal in the tech and internet sector,” said Ping An Securities in a report. “They are still weighed down by the policy and valuation pressures.”

Wuxi Biologics and ENN Energy led losses on Thursday, retreating by more than 4 per cent. Tencent slipped 0.3 per cent, while Kuaishou Technology and Bilibili, both partly owned by the WeChat operator, lost at least 3.9 per cent.

Stock benchmarks slumped across Asia, with Singapore and Vietnam being the only two markets that advanced. Japan’s Nikkei 225 index dropped by almost 3 per cent, tracking an overnight pullback in US equities. Minutes from the US Federal Reserve’s previous meeting signalled a quicker path in the unwinding of US monetary stimulus. Yields on 10-year Treasuries rose to the highest since April.

Stock indexes fell on the two main exchanges in Shanghai and Shenzhen. Shanghai’s Composite Index fell 0.2 per cent, while Shenzhen’s index fell 0.04 per cent.

Meanwhile, Hong Kong reimposed some of the toughest social distancing rules to combat a fifth wave of Covid-19 as the Omicron cases in the city increased. Flight from eight countries including the US and the UK will be suspended, bars and gyms will be closed and dine-in services will be banned after 6pm local time.

China Resources Power slumped 9.6 per cent, heading for a 19 per cent decline this week, on speculation that it will spin off its green-energy operations.

Elsewhere, semiconductor maker C*core Technology rose 0.6 per cent from its initial public offering price to 42.25 yuan on the first day of trading on Shanghai’s Star Market.

Author: Zhang Shidong, SCMP

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