Hong Kong stocks head for third quarterly loss as Chinese manufacturing contracts, US digs in heels on delistings deal

  • China’s manufacturing purchasing managers’ index dropped to 49.5 in March, the first time it has dipped below 50 in five months
  • US watchdogs quelled speculation about a deal to retain the listing status of about 200 Chinese companies trading on American bourses

Hong Kong stocks were heading for a third straight quarterly loss on Thursday after a contraction in Chinese manufacturing deepened concern about a further slowdown in growth, and the risk of China’s offshore companies being thrown off American bourses lingered.

The Hang Seng Index dropped 0.8 per cent to 22,052.49 at the noon break. The benchmark was poised for a 5.8 per cent decline for the quarter after a wild ride exacerbated by panic selling amid geopolitical tensions and dip-buying spurred by Beijing’s pledge to arrest a decline in stocks and growth.

The Hang Seng Tech Index slid 1.3 per cent, while China’s Shanghai Composite Index slipped by 0.1 per cent.

Clothes maker Shenzhou International Group Holdings, Wuxi Biologics and Alibaba Health Information Technology led losses on the Hang Seng Index, retreating at least 3.6 per cent each.

China’s manufacturing purchasing managers’ index dropped to 49.5 in March, according to the statistics bureau, the first time it has dipped below 50 in five months. A reading below 50 indicates contraction. The reading trailed the median estimate of 49.8 in a Bloomberg survey of economists.

China, which is sticking to a zero-Covid strategy, is grappling with the most severe resurgence of the pandemic since its first outbreak at the end of 2019. Shanghai, its biggest commercial city, is now in a two-phase lockdown, while the technology hub of Shenzhen has just brought the epidemic under control after a week-long cooping-up.

Swiss private bank UBP said this week that China will soon resume cutting interest rates to sustain growth. Reducing banks’ reserve requirement ratio will also be an option in the second quarter.

“The recent resurgence in the pandemic will undoubtedly put corporate earnings under pressure,” said Essence Securities in a report on Thursday. “The market will now focus on how specific policies will be put in place after the government talked up the market.”

Sentiment was also hurt when the Securities and Exchange Commission (SEC) added more Chinese companies trading in the US – including Baidu and online brokerage Futu Holdings– to a list of those allegedly not complying with audit rules, a move that will lead to possible delisting.

SEC chairman Gary Gensler quelled speculation about an immediate deal with his Chinese counterpart to retain the listing status of about 200 such Chinese companies, saying that only full access to audit papers for US accountants could guarantee this.

Among the biggest decliners, Shenzhou International slid 6.5 per cent to HK$105.80, Wuxi Biologics lost 5 per cent to HK$65.75 and Alibaba Health dropped 3.6 per cent to HK$5.03.

Vaccine maker Jiangsu Recbio Technology was unchanged at HK$24.80 on its first day of trading in Hong Kong. Redco Healthy Living, the property management firm, jumped 39 per cent to HK$5.70 on its debut, and household appliance maker Ferretti added 0.1 per cent to HK$22.90.

Author: Zhang Shidong, SCMP

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