Hong Kong stocks slump to lowest in 5 years on Ukraine conflict, Covid-19 deaths while China dials down growth target

  • China’s biggest tech companies including Alibaba, Tencent, Meituan, Bilibili and XPeng trade at their lowest levels in at least one year
  • Lingering war in Ukraine and record Covid-19 death rate in the city stoke risk aversion, while China sets slowest GDP growth rate since 1991

Hong Kong’s stocks tumbled to the lowest level in more than five years on concerns inflation will deteriorate as the war in Ukraine enters its second week with sanctions against Russia set to widen. China set the lowest growth target in three decades.

The Hang Seng Index slumped 3.4 per cent to 21,159.18 at the local noon trading break, set for the lowest close since July 2016. The benchmark earlier sank more than 1,000 points in the biggest sell-off in seven months. The Hang Seng Tech Index retreated 3.9 per cent to a new low, while the Shanghai Composite Index lost 1.4 per cent.

Fifty-seven of the 66 Hang Seng Index members dropped. WuXi Biologics, Haidilao and Sands China plunged more than 7 per cent. China’s Big Tech from Alibaba Group Holding and Tencent to Meituan, Bilibili and XPeng all fell to their 52-week lows.

“The war has driven commodities and grains higher and that will have a profound impact on the global economy,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “Economic recovery will be in doubt.”

Local stocks also plunged as Hong Kong continued to record a big surge in Covid-19 infections, with the death rate hitting the highest worldwide. China on Sunday also reported the highest daily infections since the first outbreak in Wuhan in 2019.

Water-bottling firm Nongfu Spring tumbled 6 per cent while PC maker Lenovo Group lost 3.7 per cent. Both stocks were added as new Hang Seng Index constituents from Monday following a quarterly review last month.

Asia-Pacific markets also took a beating as equity benchmarks in Japan, Taiwan and South Korea all retreated by more than 2 per cent. Crude oil topped US$120 a barrel, natural gas and grains all surged on concern about supply-chain disruptions. Gold futures surpassed US$2,000 an ounce, a 16-month high.

US Secretary of State Anthony Blinken said on Sunday America and its allies are looking into a coordinated embargo on Russian oil exports. Russian President Vladimir Putin said that the war will continue unless Ukraine surrenders.

Meanwhile, Chinese Premier Li Keqiang set a 5.5 per cent target for economic growth in 2022 at the opening session of the annual legislative meeting over the weekend. The goal was the lowest since 1991 and below the “above 6 per cent” target for last year.

The modest target suggests policymakers could deliver stronger stimulus measures when the economy faces rising domestic and external uncertainties, according to JPMorgan Asset Management.

China will probably cut banks’ reserve requirement ratio by a full percentage point and interest rates by 50 basis points this year to counter policy tightening in the US, according to China Renaissance Securities in Hong Kong.

Author: Zhang Shidong, SCMP

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