Hong Kong stocks slammed by JD.com after share placement deal while market waits for Meituan earnings surprise

  • JD.com to pick up US$692 million worth of new shares in JD Logistics; other investors to buy US$398 million block at 10 per cent discount
  • Meituan and SenseTime are both due to issue their earnings report cards later today

Hong Kong stocks fell, trimming weekly gain after shares of JD.com tumbled following a US$1.1 billion fundraising by its logistics arm. Traders kept risk appetite in check pending more potential slip-up in Big Tech earnings.

The Hang Seng Index dropped 1.6 per cent to 21,590.25 at the local noon trading break, reducing the recovery this week to 0.8 per cent. The Tech index weakened 2.6 per cent, while the Shanghai Composite Index slid 0.5 per cent.

JD.com, the third-largest Tech Index member, sank 3.4 per cent to HK$233.40 after agreeing to spend HK$5.4 billion (US$692 million) to buy 261.4 million new shares in JD Logistics to retain its 63.5 per cent ownership, slicing part of its US$13.7 billion cash hoard.

The logistics unit plunged by a record 14 per cent to HK$19.82. The firm is separately raising US$398 million by selling 150.5 million shares to outside investors. Both share placements were priced at HK$20.71 each, a 10 per cent discount to the market, according to stock exchange filings.

Elsewhere, WuXi Biologics and Alibaba Health each lost more than 5 per cent, while Tencent Holdings slid 1.9 per cent for a second day of losses after reporting slower quarterly revenue and earnings. Alibaba Group Holding dropped 3.7 per cent.

“After the decent rebound we have seen, corporate results and [listed companies’] business outlook is now becoming the focus and test for the market now,” said Ping An Securities in a report.

Before today’s decline, Hong Kong’s stock market has regained about US$730 billion in market value since rebounding from a 10-year low on March 15. A record US$25 billion buyback plan from Alibaba and Xiaomi also helped trigger a rally, after an encouragement from top Chinese regulators last week.

Meituan slid 6.1 per cent to HK$138.10 before its earnings report card later Friday. China’s biggest on-demand delivery platform operator is expected to narrow its fourth-quarter loss to 7.2 billion yuan (US$1.1 billion) from 10 billion a quarter earlier.

SenseTime dropped 1.2 per cen to HK$6.33 as China’s biggest artificial intelligence software provider prepares to issue its first earnings report as a public company. The stock has risen 64 per cent since its December 30 debut, a rare feat in the face of tech rout.

Sentiment was also hurt after the US said it was premature to expect a deal with China regarding the status of Chinese companies listed in US exchanges. The Public Company Accounting Oversight Board on Thursday said it’s uncertain if Beijing would allow a full review of their audit papers.

Guangzhou Lushan New Material, which makes adhesive material, surged 44 per cent to 37.14 yuan on the first day of trading in Shanghai. Another debutant Changzhou Xiangming Intelligent Drive System jumped 75 per cent to 51.77 yuan in Shenzhen.

Other Asian markets were mixed, as traders continued to weigh the fallout from surging inflation following a spike in commodity prices. US stocks rose overnight on a strong employment report.

Author: Zhang Shidong, SCMP

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