Hong Kong stocks trade near 2-year low on lockdown concerns, Alibaba downgrades while Russia sanctions inflict pain

  • Hong Kong logged more than 34,000 Covid-19 cases on Monday, straining medical facilities and stoking citywide lockdown risks
  • Fallout from sanctions on Russia widens in financial markets as investors seek protection from sell-off

Hong Kong stocks extended a decline from near a two-year low as risk aversion heightened amid concerns about citywide lockdown as Covid-19 cases surged. Sanctions against Russia widened following its invasion of Ukraine.

The Hang Seng Index dropped 0.1 per cent to 22,694.85 at the local noon trading break as market volatility reached a four-month high. Alibaba Group Holding slipped to a record low, limiting the Tech Index to 0.2 per cent gain. The Shanghai Composite Index rose 0.3 per cent after a report showed manufacturing grew last month.

Alibaba tumbled 1.3 per cent while CLP Holdings lost at least 2.5 per cent after earnings n 2021 trailed analysts’ projection. CSPC Pharmaceutical also dragged the market lower with more than 2 per cent setback.

Hong Kong logged more than 34,000 cases on Monday, overwhelming isolation and hospital facilities. The government will impose a large-scale lockdown and conduct Covid-19 mass testing next month to fight the fifth wave, the Post reported on Tuesday.

Hong Kong’s benchmark stock index tumbled 4.6 per cent in February, the most since a 7.5 per cent slump in November. The retreat erased US$259 billion from the market, and overturned the 1.7 per cent gain in January.

“In the near-term, markets will continue to gyrate,” said David Chao, a market strategist at Invesco in Hong Kong. “There could be a continued risk-off sentiment, as investors look to safe-haven assets such as the US dollar, the Japanese yen, large-cap equities and gold.”

Sentiment remained fragile as the Russia-Ukraine conflict entered its sixth day. Russian currency and assets plunged as talks between the two nations concluded without an end to the conflict, Ukraine government said. Global index compilers are reviewing their investability.

Meanwhile, at least 11 investment banks from Deutsche Bank to CICC have cut the price targets for Alibaba’s Hong Kong-listed stocks since its February 24 quarterly earnings report, according to Bloomberg data. The consensus 12-month target has been trimmed to HK$179.04 from HK$192.98 over the period.

Elsewhere, China’s official PMI manufacturing index rose to 50.2 in February from 50.1 in January despite disruption in preparation for the Winter Olympics, the statistics bureau said on Tuesday. That beat the market consensus of 49.8. Reading above 50 indicates expansion.

Author: Zhang Shidong, SCMP

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