Hong Kong stocks sink as Alibaba hits record-low amid price downgrades, Fed concerns while city battles Covid-19 outbreaks

  • More than 20 analysts have trimmed their price targets for e-commerce group over the past month, including at least three this week, according to Bloomberg data
  • Goldman Sachs downgrades Alibaba Health to neutral from buy as stock declines by almost 10 per cent this year

Hong Kong stocks resumed its decline, led by another round of sell-off in Alibaba Group Holding as more analysts trimmed their price targets before its earnings report, while the city struggles to contain more Covid-19 outbreaks. The Federal Reserve reiterated its hawkish stance.

The Hang Seng Index retreated 2.6 per cent to 23,664.80 at the local noon trading break, after earlier losing the most in four months. The city’s Tech Index sank 4.5 per cent, the most in three weeks, while China’s Shanghai Composite Index lost 0.9 per cent.

Alibaba, the owner of this newspaper, tumbled 6.5 per cent to HK$109.30, hitting an all-time low. NetEase retreated 5.1 per cent while both Meituan and JD.com lost at least 4.8 per cent and Tencent fell 3.2 per cent.

More than 20 analysts have trimmed their price targets for Alibaba’s US or Hong Kong-listed shares over the past month, including at least three this week, according to Bloomberg data. The firm may report its third-quarter results as early as next week, according to precedent.

The group’s healthcare unit Alibaba Health slipped 8.3 per cent to HK$5.74 after Goldman Sachs downgraded the stock to neutral from buy on Thursday, with a price target of HK$8. The stock has lost almost 13 per cent this year.

Higher borrowing costs “are likely to continue to pressure highly valued part of the equity market,” Kelly Craig, global market stategist at JPMorgan Asset Management, said after the Fed decision. “Yields should rise, but growth worries may keep investors cautious in the near term.”

An early market rally on Wall Street gave way to a broad slide for stocks and a surge in bond yields Wednesday after the Federal Reserve signalled plans to begin raising interest rates soon.


The Federal Reserve ended its first policy meeting this year, saying it intends to raise interest rates soon to fight inflation, roiling US stocks and cryptocurrencies this month. It expects to start bond-tapering as soon as it raises borrowing costs after inflation quickened to a 39-year high, it added.

“The Committee decided to continue to reduce the monthly pace of its net asset purchases, bringing them to an end in early March,” it said. “Beginning in February, the Committee will increase its holdings of Treasury securities by at least $20 billion per month and of agency mortgage‑backed securities by at least $10 billion per month.”

Major Asia-Pacific markets fell. Japanese and Korean shares lost at least 3 per cent, while the Australian benchmark declined 1.9 per cent.

Meanwhile, the CSI 300, which tracks the biggest companies in Shanghai and Shenzhen bourses, has declined about 1.7 per cent this week, with trading set to pause for five days from January 31 for the Lunar New Year.

The Hang Seng has dropped about 4 per cent this week ahead of a three-day closure starting Feb 1. Markets in Hong Kong fell in the week preceding the Lunar New Year in five of the past 10 years.

Hong Kong is battling the Delta and Omicron variants in the current fifth wave of infections, clouding efforts to resuscitate the local economy. Four major clusters have kept health officials busy, including a lockdown on one large housing estate.

Anhui Tongguan Copper Foil Group and Guangdong Weide Information Technology rose at least 26 per cent on its trading debut. Great Microwave Technology fell 10 per cent. In Hong Kong, Qingdao Ainnovation Technology lost 23 per cent on its first day of trading.

Author: Cheryl Heng, SCMP

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