Hong Kong stocks sink as Alibaba, tech juggernauts head for worst day in 3 weeks on earnings jitters

  • Hang Seng slips as tech benchmark tumbles by the most since October 27 before key earnings reports from Alibaba and peers
  • Signs of weaker earnings and losses forewarned by results from Tencent to Bilibili as companies suffered from a year-long crackdown

Hong Kong stocks slumped with Chinese tech juggernauts facing their worst day in three weeks on concerns about weaker earnings amid a slowdown in the world’s second-largest economy.

The Hang Seng Index retreated 1.4 per cent to 25,305.07 at the local noon trading break. The city’s tech benchmark sank 3 per cent, the most since a 3.2 per cent setback on October 27. The Shanghai Composite Index lost 0.1 per cent.

Stocks took a beating as traders locked in a 14 per cent rebound in tech firms from this year’s low in October. The rally over the past month is now upended by signs pointing to slower earnings at Big Tech after a year-long crackdown, while the nation’s economic growth faltered over the past two quarters. Tencent Holdings last week reported the slowest earnings growth in two years.

Alibaba, the owner of this newspaper, tumbled 4.9 per cent, the most in 10 weeks, before the e-commerce group’s earnings report later Thursday. Its health unit retreated 4.8 per cent. Rival JD.com, which also reports on the same day, fell 3.3 per cent. Food delivery platform operator Meituan slipped 3.2 per cent before its report card next week.

“Alibaba’s core business is expected to be under pressure because of weak consumer spending,” said Jiao Juan, an analyst at Essence Securities in Shanghai. ”Headwinds such as the sporadic outbreak of the pandemic and flooding have chipped away at spending impetus.”

Investors were forewarned by a few weak reports overnight. Search engine operator Baidu sank 7.8 per cent after it slumped to a 16.6 billion yuan (US$2.6 billion) loss from a profit of 13.7 billion yuan a year earlier. Video-streaming operator Bilibili plunged 11 per cent after losses widened to 2.7 billion yuan from 1.1 billion yuan.

Major developers also declined. China Evergrande fell 2.5 per cent after it exited from HengTen Netwrks on Thursday. Country Garden lost 4 per cent, after announcing a trading halt in its services unit. Media reports said Country Garden Services was seeking to raise funds through a stock sale.

Three firms started trading for the first time on the mainland bourses. ACM Research (Shanghai), a semiconductor manufacturer, jumped 60 per cent. Assure Tech, which develops and produces testing reagents, rose 19 per cent. Hunan Hengguang Technology, a chemical manufacturer, surged 164 per cent.

Markets in Asia-Pacific were mixed on Thursday. Australian equities rose 0.2 per cent, its Japanese counterpart fell 0.8 percent while the South Korean benchmark remained unchanged.

Authors: Cheryl Heng, Zhang Shidong, SCMP

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