Hong Kong stocks slide on WuXi Biologics’ record 32 per cent crash after US puts 33 Chinese firms on red-flag list

  • WuXi Biologics slumps by a record 32 per cent as firm named among 33 in the Department of Commerce’s so-called “unverified list”
  • Alibaba extends decline amid speculation about insider selling after the e-commerce group’s plan to register new American depositary shares

Hong Kong stocks retreated for a second day, hammered by renewed US-China tensions after the Biden administration raised red flags on “unverified” Chinese technology companies, placing them under tighter export restrictions.

The Hang Seng Index slid 1.5 per cent to 24,202.19 at noon trading break. The city’s Tech Index lost 2.3 per cent, while China’s Shanghai Composite Index slipped 0.9 per cent.

WuXi Biologics tanked by a record of as much as 32 per cent in Hong Kong, before trading was halted, erasing about US$77 billion of its market value. The biotechnology firm was named among 33 Chinese firms in the Department of Commerce’s so-called “unverified list.” The stock commands 2.6 per cent weight in the city’s benchmark index.

Wuxi Apptec, a biotech contracting firm controlled by the founders of WuXi Biologics, slumped 15.1 per cent although it was not on the red-flag list.

“It may not be worthwhile to hold onto WuXi Biologics as no one can be sure of further action from the US government,” said George Au, an analyst at Phillip Securities. The US move is unlikely to affect the recovery of Hang Seng Index, which has gained 3.4 per cent so far this year, he added.

The 33 Chinese firms were added on the basis that the Bureau of Industry and Security was unable to verify their bona fides because an end-use check could not be completed satisfactorily for reasons outside the US government’s control.

Other listed companies in the red-flag list include Guangdong Guanghua Sci-Tech Company and Zhuzhou CRRC Special Equipment Technology Company. They each fell by 0.7 per cent and 13 per cent.

Elsewhere, Alibaba Group Holding extended losses with a 3.4 per cent drop amid lingering concerns about its plan to register more American depositary shares. Meituan and JD.com declined at least 2.9 per cent, while Tencent lost 1.6 per cent.

In Hong Kong, the city is expected to return to its most stringent social distancing measures, capping public gatherings at two people and a new “vaccine pass” to enter shopping malls. Hong Kong confirmed 614 new infections on Monday, doubling from the day before.

Major Asian markets rose. Japanese and Korean equities rose at least 0.3 per cent while Australian stocks gained at least 1.2 per cent.

Author: Cheryl Heng, SCMP

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