Hong Kong stocks fall most in 8 weeks, with Chinese delivery giant Meituan expected to report widening quarterly loss

  • Hang Seng Index heading for its steepest loss since October 4, ahead of Meituan’s earnings and media reports about Didi’s possible US delisting
  • Meituan’s third-quarter loss may have widened to 7.04 billion yuan (US$1.1 billion), according to a consensus estimate

Hong Kong stocks dropped the most in almost eight weeks on Friday, on mounting concerns over the outlook for the Chinese technology sector, and after the city reported two cases of a new coronavirus strain.

The Hang Seng Index sank 2.1 per cent to 24,213.55 at the noon break, and is heading for its steepest loss since October 4. The decline on the 60-member benchmark was broad-based, with 59 stocks falling. It has slid 3.3 per cent this week, the most in two months.

The Hang Seng Tech Index slumped 2.6 per cent, while China’s Shanghai Composite Index slid 0.5 per cent.

Sentiment around local stocks has taken a beating as third-quarter losses at Meituan, whose result are due later on Friday, probably widened and media reports surfaced that Chinese regulators had asked ride-hailing giant Didi Global to delist its shares trading in the US because of the possible leakage of sensitive data.

A possible resurgence of the coronavirus pandemic in China and Hong Kong is also weighing on sentiment. Hong Kong confirmed two cases of a new strain that was first spotted in South Africa. The new strain has prompted the UK to suspend flights from six African nations and some European nations are considering reimposing tightening measures. Meanwhile, Shanghai, China’s biggest commercial city, reported three new Covid-19 infections.

“With the delta wave in mind from earlier this year, investors are likely to shoot first and ask questions later until more is known about it,” said Jeffrey Halley, an analyst Oanda.

Other major markets in Asia were all weak, with Japan’s Nikkei 225 falling more than 2 per cent for the biggest decline. US markets were closed in overnight trading for the Thanksgiving holiday.

Macau casino operators were the worst performers on the Hang Seng Index, with Galaxy Entertainment Group and Sands China falling more than 4 per cent.

The Didi report has added to an already bearish mood on Chinese technology stocks, which have rattled the market over the past few weeks after a flurry of surprise earnings misses. While some investors had earlier argued that these stocks were already cheap enough to buy after Beijing’s regulatory crackdown, worsening earnings situations have thrown this idea into doubt.

“It will take time to reshape the landscape of the industry, after China took measures to rectify monopolistic practices,” said Gary Ching, an analyst at Guosen Securities in Hong Kong. “There’s still some downside room, before the valuations fall to reasonable levels.”

Meituan, China’s biggest on-demand services delivery firm, slid 3.9 per cent to HK$263.40. Its losses may have widened to 7.04 billion yuan (US$1.1 billion) from the second quarter based on the US accounting standard, according to a consensus estimate by 14 analysts tracked by Bloomberg.

Three debutants made strong starts on the mainland’s exchanges. Guangzhou Jinzhong Auto Parts Manufacturing logged the biggest first-day gain, surging 299 per cent from its initial public offering price in Shenzhen. Qingdao Yunlu Advanced Materials Technology jumped 164 per cent in Shanghai, while Anhui Hwasu, a chemical product maker, rose 44 per cent.

Author: Zhang Shidong, SCMP

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