Hong Kong stocks slip as Alibaba, Tencent lead losses amid new China lockdowns, Fed tightening focus

  • Alibaba, Tencent and JD.com slump in early trading as southern Hainan locks down Sanya resort city, following earlier curbs elsewhere last week
  • A stronger than expected US job report for July keeps appetite in check amid Fed tightening bias

Hong Kong stocks fell from a one-week high on concerns new lockdowns in mainland Chinese cities will disrupt efforts to reboot the economy, adding to a widening US-China rift over Taiwan-related issues. A strong job report also put policy tightening in the US back in focus.

The Hang Seng Index retreated 0.8 per cent to 20,050.15 at the local noon trading break. The Tech Index lost 1.7 per cent, while the Shanghai Composite Index added 0.2 per cent.

Alibaba Group Holding slumped 3.9 per cent to HK$89.25 while Tencent Holdings lost 2.1 per cent to HK$301.20 and JD.com dropped 3 per cent to HK$238. Geely Automobile weakened 1.7 per cent to HK$17.54.

“The recent Covid-19 rebound in some provinces or cities, especially in Hainan, might slow down economic growth,” analysts at KGI Securities wrote in a note on Monday. “Together with intensified geopolitical pressure, Hong Kong stocks are expected to consolidate today.”

China’s southern resort island of Hainan has placed cities in lockdown over the weekend, including its capital Haikou and tourist town Sanya, according to state broadcaster CCTV. The latest curbs followed a quasi-lockdown in Yiwu, a commercial hub in eastern Zhejiang province.

Following its 5.7 per cent rally in June, the MSCI China Index has shed all its gains in July and early August. Its June rally came as investors expected a short-term economic recovery on more fiscal measures, which dwindled as China’s Covid-19 cases rebounded alongside concerns about mortgage boycotts.

China’s top leadership meeting in July also saw a lack of stimulus announcements, while the recent cross-strait tension surrounding Taiwan has heightened downside tail risks for Chinese stocks.

In Hong Kong, new cases surged to 5,020 on Thursday, the most since April 1 and surpassing the 5,000 threshold for the first time in four months. A flare-up is likely to reduce the odds of reopening the border with mainland China soon. Stocks remained lower after the government unveiled a plan to ease Covid-19 entry rules for international arrivals.

Lifestyle International, the operator of Sogo department stores in Hong Kong, surged by a record 50 per cent to HK$4.61. Its controlling shareholder Thomas Lau Luen-hung offered HK$5 each or a total of HK$1.88 billion (US$239 million) for shares he does not already own to privatise the company.

Elsewhere, the United States late on Friday reported a bigger-than-expected gain of 528,000 jobs in July as the unemployment rate declined to 3.5 per cent, indicating underlying strength in the economy and disappointing traders looking for the Federal Reserve to dial back its hawkishness.

Three stocks started trading. Chongqing VDL Electronics surged 32.7 per cent to 81.05 yuan, while Hebei Gongda Keya Energy Technology jumped 54 per cent to 39.38 yuan. Guangdong AVCiT Technology gained 44 per cent to 31.26 yuan.

Asian markets were mixed. Japanese shares added 0.3 per cent, while South Korean and Taiwanese stocks dropped by 0.1 to 0.3 per cent and Australian equities were little changed.

Author: Cheryl Heng, SCMP

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