Hong Kong stocks erase losses on China policy bets while Tencent slides on earnings, buyback disappointment

  • Tencent did not unveil an expanded buyback plan after speculation in the wake of Alibaba’s record plan; operating profits, excluding one-time gain, weakened
  • Hang Seng Index has recouped US$730 billion or nearly a fifth of its value since rebounding from a 10-year low last week

Hong Kong stocks erased losses from earnings disappointment to build on the longest winning streak in two months on bets China will offer more policy support to shore up the economy and stabilise the market.

The Hang Seng Index advanced for a third day, adding 0.2 per cent to 22,195.96 at the local noon trading break, while the Tech Index trimmed a decline to 0.2 per cent as Alibaba Alibaba Group Holding gained for a fourth day. The Shanghai Composite Index retreated 0.5 per cent.

Haidilao jumped more than 8 per cent to lead benchmark index winners, after China International Capital Corp said table turnover rate, a key business metric, recovered in the first two months this year. China Mobile climbed 4 per cent after earnings grew 8 per cent and JPMorgan upgraded the stock.

“While the economy and [some of the corporate earnings] are still in a downward trend, there is a low risk for equities amid the policy shift and sentiment improvement,” Essence Securities said in a report on Thursday.

Local stocks have regained about US$730 billion in market value since the benchmark index slumped to a 10-year low on March 15. A record US$25 billion buyback plan from Alibaba and Xiaomi helped trigger a rally following a promise from top Chinese regulators to bolster growth and stocks.

The Hang Seng Index earlier fell as much as 1.2 per cent. Tencent slumped 3 per cent to HK$377.20, the most in a week, as the WeChat operator deflated hopes for a larger stock buyback, having spent HK$2.6 billion (US$332 million) in 2021 to help shore up its own shares.

China’s biggest video-game developer also posted slower operating profits, excluding one-time gain from sale of assets and investments such as JD.com stake reduction. They declined about 23 per cent before interest expense and income tax, according to results published late Wednesday.

So far, 43 of the 66 members on the Hang Seng Index members have released their latest 2021 reports, with earnings trailing market consensus by an average of 0.8 per cent, according to Bloomberg data. Other key reports Thursday will come from China Life Insurance and China Resources Beer.

Most markets in Asia-Pacific weakened, except in Australia, as US Treasuries halted a sell-off triggered by a hawkish stance by the Federal Reserve following a lift-off last week.

Author: Zhang Shidong, SCMP

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