Hong Kong stocks start 2022 as Covid-19 dents sentiment and Alibaba slips while car producers limit losses

  • Covid-19 outbreaks in mainland China hit garment maker Shenzhou International while tighter restrictions are being put in place in other affected cities
  • Trading in Evergrande is halted as developer seeks to implement a repayment plan for investors in US$31 billion of high-yield wealth management products

Hong Kong stocks fell on concerns tighter rules to stem Omicron infections in the city and mainland China will dent business and economic activity. Limiting losses, car makers advanced on robust December sales.

The Hang Seng Index slipped 0.6 per cent to 23,252.69 at the local noon trading break, following a 0.8 per cent gain in the final week of trading in 2021. The benchmark index only fell on the opening day of trading in 2019 and 2016 over the past 10 years.

The Hang Seng Tech Index dropped 1 per cent, with Alibaba Group Holding and its health information unit retreating by at least 3.8 per cent. Markets in mainland China are shut for a public holiday.

Shenzhou International plunged 7.9 per cent, leading index losers, after the Chinese garment manufacturer reported Covid-19 cases among its employees. Its factories in Ningbo, in eastern province of Zhejiang, were locked down after the firm reported 10 Covid-19 cases since Sunday, it said in a filing.

“The developments of the Covid-19 pandemic remains as a big uncertainty,” Stanley Chik, research director at BrightSmart Securities, said in a note on Monday. Local stocks will remain volatile this year as global central banks tweak rate policies, he added.

In Hong Kong, fears of an Omicron outbreak grew as three cases were confirmed Sunday, including a Cathay Pacific aircrew member who is thought to be the source after breaking isolation rules. Cathay fell 0.9 per cent to HK$6.33.

Xpeng Motors jumped 5.4 per cent, leading gains among car makers. China’s top three electric vehicle start-ups maintained their strong sales momentum as deliveries surged in December to cap a banner year. Li Auto added 2.4 per cent.

Xpeng and Li Auto posted record sales, while NIO’s deliveries surpassed 10,000 units again in December. Caution remains after China reduced EV subsidies by 30 per cent on January 1 and prepares to remove them from next year.

Meanwhile, China Evergrande suspended its stock from trading, according to an exchange filing, without giving a reason. The troubled developer last week proposed a new repayment plan for investors holding some of its 200 billion yuan (US$31 billion) of high-yield investment products.

Major Asian markets were mixed. South Korean equities rose 0.3 per cent, while Australian and Japanese stocks retreated by 0.4 to 0.9 per cent.

Author: Cheryl Heng, SCMP

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