JD.com, Tencent drag Hong Kong stocks as China slowdown dents earnings, BlackRock cuts view on market outlook

  • Alibaba, Tencent, JD.com lead losses as Covid-induced lockdowns hit corporate earnings
  • Money managers at BlackRock see more downside to China economy after downgrading views on local, developed market stocks

Hong Kong stocks fell for the second day as investors braced for more signs of weaker earnings from tech companies after China’s Covid-induced slowdown forced more global strategists to turn cautious on equities.

The Hang Seng Index declined 1.4 per cent to 20,187.37 at the local noon trading break, set for the first back-to-back losses in two weeks. The Tech Index retreated 2 per cent, while the Shanghai Composite Index fell 1.1 per cent.

Alibaba Group Holding slipped 0.9 per cent to HK$84.30 and JD.com fell 3.4 per cent to HK$205.60. Tencent Holdings dropped 1.6 per cent to HK$341.40 after Barclays downgraded its rating on its US-listed shares, citing stalling growth in key businesses.

About 70 per cent of the members on the MSCI China Index have reported earnings as of Monday, according to Bloomberg data. Its 744 constituents generated 1.4 per cent profit growth on average, with more than half of them trailing consensus estimates.

Video-sharing platform Kuaishou and online gaming group NetEase are set to announce their quarterly results on Tuesday. Kuaishou fell 0.8 per cent to HK$65.40 while NetEase weakened 1.2 per cent to HK$152.

Chinese electric-vehicle start-up XPeng slumped 7.4 per cent to HK$84.15. Net loss widened to 1.7 billion yuan (US$255 million) from 786.6 million yuan a year earlier and was slightly worse than analysts’ estimate of 1.67 billion yuan.

“We expect China’s deteriorating economic outlook to be a drag on global growth and we think consensus forecasts for China’s 2022 GDP growth are likely to get revised down,” global strategists including Wei Li at BlackRock wrote on Monday.

Economists including those at Goldman Sachs, UBS and JPMorgan have trimmed their growth forecasts for China this year as the cost of Covid-19 lockdowns snowballed. BlackRock, the world’s biggest money manager, downgraded its view on China and developed markets stocks this month.

Goldman cut its forecast to 4 per cent from 4.5 per cent, while UBS lowered its full-year target to 3 per cent from 4.2 per cent, citing the impact of zero-Covid policy, according to Bloomberg data.

Barclays trimmed its 12-month price target for Tencent to US$44 from US$55, according to Bloomberg, leaving little upside to the current price of US$43.64. The WeChat operator’s key growth engines were sputtering and domestic gaming and advertising businesses had already stalled, the Bloomberg report showed.

Elsewhere, Great Wall Motor soared 7.8 per cent to HK$12.74, while Geely Auto jumped 5.3 per cent to HK$14.36. Auto stocks are seen as beneficiaries of tax relief measures to stabilise the economy, including a cut on purchase tax on passenger vehicles, Xinhua News reported on Tuesday, after a State Council meeting chaired by Premier Li Keqiang.

Two stocks started trading in Shenzhen. Chongqing Yuxin Pingrui Electronic Co surged 123 per cent to 57.18 yuan, while Hubei DOTI Micro Technology Co soared 97 per cent to 45.15 yuan.

Author: Cheryl Heng, SCMP

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