HSBC, BOC lead Hong Kong market losses as city grapples with Covid-19 infections and Ukraine geopolitical tension returns

On Feb 17, 2022 28

Risk aversion returns as Covid-19 wreaks havoc and Ukraine’s crisis remains. Photo: Reuters

Hang Seng reverses earlier gains as the city grapples with rising Covid-19 cases, with banks set to endure an extended period of branch closures
Key stock indices have lost by 20 to 48 per cent in trillion-dollar rout since the market last peaked on this day a year ago

Hong Kong stocks dropped for a third time this week as banks tumbled amid a hit to business from rising Covid-19 cases, while a military stand-off between Russia and Ukraine reignited risk aversion.

The Hang Seng Index lost 0.6 per cent to 24,564.50 at the local noon trading break, erasing an intraday gain of as much as 0.6 per cent. The Tech Index retreated 0.4 per cent, while the Shanghai Composite Index gained 0.4 per cent.

Banks led the declines as tougher measures are set to keep branches shut for an extended period. At least a quarter of outlets in the city have been forced to close due to reasons including staff infections. BOC Hong Kong fell 2.2 per cent and HSBC lost 1.5 per cent. Alibaba Group Holding slid 1 per cent.

“The market performance will remain shaky for a period of time as the Omicron variant is still a major concern of the market alongside with the geopolitical uncertainty,” analysts at Central China Securities said in a note on Thursday.

Officials are galvanising plans to combat record Covid-19 infections, including enlisting help from top developers for rooms to isolate affected citizens and readying the population for mass testing from early March. Daily infections rose to a record 4,285 on Wednesday.

Elsewhere, the US warned that Russia has added troops to its border with Ukraine, rejecting Moscow’s claim that it has pulled them in favour of a diplomatic solution. Demand for safe haven rebounded, with gold futures testing an eight-month high.

Traders are keeping a close eye on how fast the Federal Reserve will raise borrowing costs. The latest minutes showed that the Fed would start to lift interest rates soon and were on alert for persistent price pressure after inflation accelerated at the fastest in four decades last month.

Signs of bargain hunting emerged in earlier trading. Members on the Hang Seng Index trade at about 10 times price-earnings ratio on average, the cheapest next to Brazil among major global indices, according to Bloomberg data.

The Hang Seng Index has lost 20 per cent, while the Tech Index slumped 48 per cent in a trillion-dollar rout since both gauges peaked on this day a year ago.

“The valuations of Hong Kong stocks, particularly tech stocks, are at a low level currently,” said Chen Ping, a fund manager at HSBC Jintrust Fund Management in Shanghai. “We expect policies not to get tougher on the backdrop of stabilising growth. Policy loosening will spur expansion of the valuations.”

Author: Zhang Shidong, SCMP