Hong Kong stocks log worst week since March 2020 on earnings woes, Russia-Ukraine conflict

  • Stocks tumble in week as investors reduced bets amid escalating tensions after Putin orders Russian operations in Ukraine
  • Alibaba Group trades near record low after a report card showing weak revenue growth and deeper than expected drop in earnings last quarter

Hong Kong stocks suffered its worst week since the outset of Covid-19 pandemic two years ago as the risk aversion stoked by the Russia-Ukraine conflict and earnings woes weighed on markets.

The Hang Seng Index has slumped 6.8 per cent this year, the most since an 8.1 per cent sell-off in the second week of March 2020. The benchmark slipped 0.2 per cent to 22,866.03 at the local noon trading break on Friday, while the Tech Index added 1.5 per cent. The Shanghai Composite Index rose 0.6 per cent.

HSBC tumbled 4.1 per cent, the index’s worst performer, while Galaxy Entertainment retreated 3.2 per cent. PetroChina and Sinopec declining at least 2.5 per cent as crude oil weakened after surging past US$105 a barrel.

In Ukraine, at least 137 soldiers and civilians were killed on the first day of a “full-scale war.” Ukrainian officials confirmed that Russian forces had seized the closed Chernobyl nuclear power plant north of its capital on Thursday.

Heightened volatility shows markets had not fully priced in the likelihood of deeper conflict, according to Mark Haefele, Chief Investment Officer for Global Wealth Management unit at UBS. A prolonged fighting could disrupt oil supply, quicken inflation, and hit consumption, earnings and equity prices, he added.

“While it is impossible to judge the precise magnitude of geopolitical effects on markets, such events have generally not prevented equities from moving higher over a medium-term horizon,” he wrote in a February 24 note. “Drawdowns driven by geopolitical stress events are typically short-lived for well-diversified portfolios.”

More than US$209 billion of market value has been erased this week from the 64 members in the Hang Seng Index on earnings disappointment and geopolitical tensions and tightening US rate policy.

Alibaba Group Holding, the owner of this newspaper, rose 0.8 per cent from an all-time low, despite a quarterly report showing revenue grew at the slowest pace on record while a 74 per cent drop in earnings was deeper than market expectations. Meituan climbed 1.7 per cent and NetEase added 2.9 per cent.

Wall Street saw a late-day comeback in overnight trading. The S&P500 closed higher, erasing losses, amid harsher sanctions on Russia. Gold retreated after approaching a record-high of US$2,063.54 while Treasury yields dropped.

Author: Cheryl Heng, SCMP

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