Hong Kong stocks hit 3-week low as Shanghai pandemic fallout slams Alibaba, Tencent amid lack of policy stimulus

  • Country Garden Services, Sunny Optical and Haidilao lead benchmark index losers, each tumbling by more than 6 per cent
  • Lockdowns in Shanghai and other mainland Chinese cities like Kunshan have taken a toll on manufacturing, crimping growth outlook

Hong Kong stocks fell to a three-week low on concerns an extended lockdown in Shanghai and other mainland cities will hit manufacturing and derail economic growth while policymakers held back policy stimulus.

The Hang Seng Index slipped 2.5 per cent to 21,336.37 at the local noon trading break, set for the lowest close since March 21. The Hang Seng Tech Index slumped 4 per cent while the Shanghai Composite Index weakened 1.8 per cent.

Among the Hang Seng Index’s worst performers, Country Garden Services tumbled 8 per cent to HK$36.90 and Haidilao lost 7.2 per cent to HK$13.10. Alibaba Group Holding shed 3.8 per cent to HK$99.85 and Tencent Holdings retreated 2.9 per cent to HK$358.80.

China is struggling to contain the most severe Covid-19 outbreak in two years, with Beijing sticking to its zero-tolerance policy. Daily confirmed cases in Shanghai surged above 25,000 on Sunday, a record since the March 28 citywide lockdown. New infections have also emerged in Guangzhou, leading to a partial lockdown in the capital of southern Guangdong province.

“It’s illogical to be long on stocks now and an upward trend on the market is unlikely,” said Yan Kaiwen, an analyst at Huaxin Securities. “There’s still a chance that stocks will test a new low.”

The stringent containment measures are hurting industries. Nio, the Shanghai-based maker of electric vehicles, halted production because of a parts shortage. Factories at Contemporary Amperex Technology (CATL), which supplies EV battery packs to Tesla, were also affected, Shanghai Securities News reported.

Government reports on Monday showed inflation accelerated faster than expected last month, limiting room for policy loosening. Consumer prices rose 1.5 per cent and factory-gate prices jumped 8.3 per cent. Both exceeded consensus estimates of economists tracked by Bloomberg.

In mainland China, CATL sank 7.3 per cent to 458.99 yuan, set for its steepest decline since March 7. Jiangsu Haili Wind Power Equipment Technology dropped 3.7 per cent to 79.91 yuan on its first day of trading in Shenzhen.

Other major markets in Asia all fell, as rising US Treasury yields raised fear of more aggressive policy tightening and looming recession.

Author: Zhang Shidong, SCMP

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