Hong Kong’s stock index plunges to a six-year low as bad news from Ukraine war to China’s worsening Covid-19 outbreaks weigh on market

  • The Hang Seng Index tumbled 3.5 per cent to 19,832.05 at 10.51 am local time, hitting a six-year low
  • Markets in the Asia Pacific were mixed, with the Japanese and Australian benchmarks rising at least 0.7 per cent, while South Korea’s stocks fell 0.9 per cent

Hong Kong stocks fell, marred by renewed regulatory concerns amid a lockdown in nearby Shenzhen, as mainland China faces the country’s most severe Covid-19 outbreak in two years.

The Hang Seng Index tumbled 3.8 per cent to 19,771.47 at the noon trading break, hitting a six-year low. The city’s tech index sank 7.6 per cent, its steepest loss in eight months, while the Shanghai Composite Index weakened by 1.6 per cent. The Shenzhen Component Index, which tracks the performance of companies listed in a city dubbed China’s version of the Silicon Valley, fell 1.6 per cent.

China has locked down Shenzhen for at least a week amid its rising Covid-19 infections, suspending public transport on Monday, while the financial hub of Shanghai and cities in the northeastern province of Jilin are battling worsening outbreaks.

JD.com led index losses in Hong Kong with a record plunge of 14.6 per cent to an intraday low of HK$180.30, after tumbling 11 per cent on Friday. Alibaba Group Holding, the owner of this newspaper, crashed 8.4 per cent to HK$83.20, another record low.

Tencent Holdings slumped 4.8 per cent. to HK$350.20. Meituan, Haidilao and Sands China shed at least 10 per cent each. Country Garden Holdings tumbled 12.1 per cent to an intraday low of HK$4.56 amid rumors the property developer is seeking onshore and offshore financing. The company issued a statement to deny that the rumours were unfounded, but not before shares of its property services unit plunged by 18.7 per cent to HK$30.30.

The tumble in Hong Kong stocks tracked their US peers, as rising regulatory uncertainties spooked investors. The US securities regulator last week named five US-listed companies that were liable under the Holding Foreign Companies Accountable Act (HFCAA), triggering a selloff. The index that tracks US-listed Chinese stocks plunged 10 per cent on Friday, the most since the 2008 global financial crisis.

“The worsening Covid-19 outbreak will hurt service industries and dent consumer confidence in the short term,” said CMB International’s research team in a note published on Monday. “That makes Beijing’s GDP target of 5.5 per cent tougher to achieve, bolstering calls for further policy easing, including moderate interest rate cuts.”

Market woes are compounded by geopolitical risks from the Russia-Ukraine conflict. Goldman Sachs analysts downgraded Hong Kong stocks to underweight on Monday citing oil price changes and broader macro views. They reduced GDP growth estimates for the Asia Pacific region in 2022 and raised inflation forecasts.

“Regional equity performance has been weaker than average because of the fundamental spillover to growth and inflation via higher energy prices,” said analysts including Timothy Moe.

They further lowered earnings growth for Asian companies and downgraded their year-end targets for MSCI Asia-Pacific excluding Japan, implying an 18 per cent upside from current levels.

Two firms started trading for the first time on Monday. Smartgiant Technology Company, which produces intelligent instrument modules in Beijing, fell 16 per cent in its trading debut, opening at 54.96 yuan compared with its IPO price of 65.65 yuan. Super-Dragon Engineering Plastics, which makes modified plastic products in Guangzhou, began trading at 76.01 yuan, a 153 per cent premium to its IPO price of 30 yuan.

Markets in the Asia Pacific were mixed, with the Japanese and Australian benchmarks rising at least 0.8 per cent, while South Korea’s stocks fell 0.8 per cent.

Author: Cheryl Heng, SCMP

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