Hong Kong stocks set for weekly loss as Shanghai lockdown pressures earnings while Goldman sees disruption to economy

  • Hang Seng falls to a one-week low as the spectre of extended lockdown in Shanghai unnerves market with hit to earnings, economy
  • In late March, mainland cities with mid- and high-risk districts accounted for one-third of China’s GDP, according to Goldman

Hong Kong stocks fell to one-week low as surging Covid-19 cases in Shanghai heightened concerns about further lockdown in China’s key commercial hub, clouding the outlook for corporate earnings amid a slowdown.

The Hang Seng Index slipped 0.6 per cent to 21,684.44 at the local noon trading break, bringing the decline this week to 1.7 per cent. The Tech Index retreated 2.3 per cent, while the Shanghai Composite Index was little changed.

Alibaba Group Holding and JD.com fell almost 3 per cent, pacing index losses, as analysts continued to trim their price targets over the past two months amid earnings hurdles. Meituan fell 3.5 per cent while Tencent Holdings lost 1.8 per cent. Consumer stocks took a hit amid mobility curbs, with Anta Sports and Li Ning retreating at least 5.6 per cent.

Shanghai remains in lockdown with 21,222 new infections over the past 24 hours, rewriting the daily record for the seventh straight day. An extended lockdown could hurt production at some of the nation’s biggest companies with facilities there, including chip makers SMIC and Hua Hong Semiconductor and car maker SAIC Motor.

“More stringent mobility restrictions in Shanghai and the risk of spillover measures in other cities pose downside risks to first-half GDP growth, especially if lockdowns extend well beyond April,” said UBS’ chief investment office in a note published on Thursday.

In the last two weeks of March, cities with mid- and high-risk districts accounted for one-third of China’s GDP, according to Goldman Sachs, expecting production disruptions in provinces that imposed tight restrictions.

Lack of truck drivers has curtailed transport of goods, causing cargo volume at Shanghai Port to drop by 40 per cent from its usual level, the European Union Chamber of Commerce in China said in a conference on Wednesday.

While policymakers in Beijing have vowed to support the real economy, they have been cautious with the easing or stimulus measures to date. The central bank last month refrained from cutting policy rates tied to the one-year medium-term lending facility amid concerns about commodity-fuelled inflation.

Rigol Technologies, a maker of electronic measuring instruments, slumped 31 per cent, the only company to debut in Shanghai on Friday.

Major Asian markets rose on Friday. Japanese shares gained 0.1 per cent and Australian stocks strengthened 0.5 per cent. The South Korean stock benchmark was little changed.

Author: Cheryl Heng, SCMP

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