Hong Kong stocks tumble, dragged down by Alibaba’s poor quarterly earnings report

  • The e-commerce giant is on track to post its largest single-day percentage decline on record
  • The Hang Seng Index retreated 1.8 per cent at noon on Friday, falling for the third day in a row

Hong Kong stocks tumbled on Friday after a weak earnings report by Alibaba Group Holding a day earlier once again shed light on the fallout of Beijing’s regulatory crackdown.

The e-commerce giant, which owns this newspaper, was on track to post its largest single-day percentage decline on record. Its performance was weighing on the Hang Seng Index, with the gauge retreating 1.8 per cent to 24,874.90 at noon on Friday, falling for the third day in a row.

Alibaba’s 10.4 per cent decline to HK$139.80 and the 5.8 per cent drop at its health unit dragged down the city’s technology benchmark as well, which fell 1.3 per cent.

The e-commerce giant fell short of expectations when it reported second-quarter results on Thursday, slashing its outlook for full-year revenue. Its net income plunged 87 per cent to 3.4 billion yuan (US$532.6 million), missing forecasts of 24 billion yuan.

“While Alibaba’s guidance for the full-year remains solid, it doesn’t help restore investor confidence, especially when one of its key drivers – Ali Cloud – was badly impacted by the regulatory crackdown in the quarter and it started losing big clients,” said Will Shum, portfolio management director in Hong Kong at iFast Financial.

China’s big technology firms – hammered by regulatory uncertainty and tighter scrutiny – face poor earnings on the back of a slowing Chinese economy. Last week, Tencent Holdings reported its slowest earnings growth in two years.

The current market sentiment remains fragile, said iFast Financial’s Shum, as seen from Bilibili’s 11 per cent plunge on Thursday despite reporting earnings that beat expectations. The video-streaming operator halted trading on Friday, according to a HKEX filing, and announced plans to raise up to US$1.6 million through a convertible note sale.

Tencent slipped 1.1 per cent on Friday. A second bear on the WeChat operator surfaced last month, citing near-term pressure.

Thursday’s underwhelming result triggered rounds of stock price downgrades by Morgan Stanley, Jefferies and Citigroup for Alibaba, which saw its only “sell” rating emerge in August when a trillion-dollar rout afflicting Chinese technology stocks dampened investors’ confidence in sector.

A slew of report cards are expected next week from Chinese internet firms such as food delivery platform operator Meituan, which slumped 3.3 per cent on Friday, and short video app firm Kuaishou Technology, which declined 3.4 per cent.

Separately, Country Gardens Services Holding plummeted 12.3 per cent after halting trading for a day, during which the property management firm raised HK$8 billion (US$1.02 billion) in a share placement.

Over on the mainland, China’s benchmark Shanghai Composite Index gained 0.3 per cent. Shandong Shanda Oumasoft, a software development company that started trading for the first time, soared 169 per cent in Shenzhen.

Markets in Asia-Pacific gained on Friday. Japanese and South Korean equities each rose by 0.5 per cent, while the Australian benchmark inched up 0.2 per cent.

Author: Cheryl Heng, SCMP

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