Hong Kong stocks set for monthly loss as Omicron, Macau crackdown add to US$220 billion index pullback

  • Hang Seng Index falls for a third day to a 14-month low as Omicron weakens risk-taking appetite while a sell-off in Macau casino operators persists
  • An improvement in official Chinese manufacturing data fails to shore up sentiment amid growing Covid-19 infection cases sparked by the new variant

Hong Kong stocks fell for a third day to the lowest level in 14 months amid concerns the Omicron coronavirus variant will derail global economic recovery. An improvement in Chinese manufacturing data failed to shore up sentiment.

The Hang Seng Index retreated 1.1 per cent to 23,591.68 at the local noon trading break. The benchmark has dropped 7.3 per cent this month to a level not seen since October 30 last year, erasing US$220 billion of market value from its members. The Hang Seng Tech Index slipped 1 per cent, while the Shanghai Composite Index rose 0.2 per cent.

Alibaba Group Holding, Tencent Holdings and Meituan tumbled 1.6 per cent to 3.3 per cent, pacing index losers, on lingering worries about earnings outlook following a weak third-quarter report. China Resources Land and Budweiser both declined by at least 3.6 per cent.

Investors continued to reduce risk-taking as the new Covid-19 variant triggered a surge in global infection cases. Countries including Japan, Britain and the US have imposed travel curbs while Hong Kong tightened entry rules for high-risk countries with reported infections.

“A new, highly contagious, virus strain could trigger growth downgrades, worsen risk sentiment,” BlackRock strategists said in a note to clients on November 29. “We still favour equities for now but would change our stance if vaccines or treatments were to prove futile.”

Global banks and financial institutions have been weighing its impact on markets, with JPMorgan Asset Management seeing the Omicron variant as a “bump in the road to recovery.” Investors may view any continued sell-off as a buying opportunity, Invesco said.

Elsewhere, manufacturing in China expanded slightly in November, with the official purchasing managers’ index rising to 50.1 from 49.2 in October, the statistics bureau said on Tuesday. The index was expected to increase to 49.7, according to economists tracked by Bloomberg.

MGM China and Sands China each retreated 2.3 per cent and Galaxy Entertainment slipped 0.5 per cent. They added to a US$4.8 billion rout on Monday in Macau casino stocks amid fears over widening industry crackdown.

Macau’s largest casino junket operator Suncity Group said its controlling shareholder Alvin Chau Cheok-wa offered to step down as chairman and executive director, following his arrest over the weekend. Its shares resumed trading on Tuesday, sinking 40 per cent to HK$0.15.

In Asia, major markets were mixed. Markets in Japan and Australia climbed and fell in South Korea. US equities rose overnight as President Joe Biden said the Omicron variant would not lead to lockdowns.

Author: Cheryl Heng, SCMP

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