Hong Kong stocks slip as global markets dive into bear market on Fed tightening overdrive, China lockdown concerns

  • Hang Seng Index slips for a fourth day, set for the longest losing streak in a month, falling in tandem with regional, global equities
  • Virus cases rebounded to a three-week high in Beijing, renewing lockdown concerns under China’s tough zero-Covid policy

Hong Kong stocks slide for a fourth day as global equities slumped into bear territory amid concerns the Federal Reserve will over tighten its policy to counter the fastest inflation in four decades. Higher Covid-19 cases in China stoked lockdown worries, adding to the market gloom.

The Hang Seng Index retreated 0.9 per cent to 20,876.31 at the local noon trading break, set for the longest losing streak in a month. The Tech Index fell 1.7 per cent, while the Shanghai Composite Index declined 1.6 per cent. Benchmarks in major Asia-Pacific markets lost by 1 per cent to 4.5 per cent.

US equities slumped by about 4 per cent overnight amid concerns the Fed will raise its target rate by more than economists expected this week after inflation re-accelerated 8.6 per cent last month, the fastest since 1981. The MSCI All-Country World Index has now lost more than 20 per cent from its mid-November peak, a definition of bear market.

“We’re not pounding the table on buying stocks right now because of a growing risk that the Fed tightens too much, or that markets believe it will, at least in the near term,” strategists at BlackRock said in a note to clients. “We’re not buying the stock dip because valuations haven’t really improved.”

Alibaba Group Holding, the owner of this newspaper, tumbled 4.2 per cent to HK$99.45. AIA Group dropped 1.3 per cent to HK$78.05, while Tencent Holdings fell 1.5 per cent to HK$371.20. Hong Kong Exchanges lost 1.5 per cent to HK$336.80 while China Merchants Bank retreated 1.7 per cent to HK$46.30.

Some 46 of the 69 Hang Seng Index members fell. BYD, Geely Auto and Xinyi Solar also logged notable losses of at least 4 per cent. The index’s four-day losing streak has erased at least US$67 billion of market capitalisation, setting back the index by 11 per cent so far this year.

“The [US] inflation data has raised market expectations that the Fed could hike by more than 50 basis points this week, and opt for a 75 basis points increase instead,” said Tai Hui, chief market strategist at JPMorgan Asset Management in Hong Kong. “Slamming on the brakes too hard risks pushing the economy off its track.”

The MSCI All-Country World Index has slumped 21 per cent from its November 16 peak, erasing more than US$18 trillion of market value. The slide is upending a US$1.3 trillion recovery in so-called “uninvestable” Chinese stocks since a sell-off in mid-March.

Elsewhere, concerns about further lockdowns in China continued to pressure the market as virus cases rebounded. Beijing recorded 74 cases on Monday, a three-week high, as the government urged local authorities to contain the outbreak as soon as possible, Xinhua News Agency reported.

In Shenzhen, Sichuan Qiaoyuan Gas soared 67 per cent to 28.19 yuan on its first day of trading, while Audiowell Electronics (Guangdong) Company slipped 4.8 per cent to 10.47 yuan in Beijing.

Author: Cheryl Heng, SCMP

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