Tencent’s decline cancels out Evergrande’s early boost, Hang Seng Index poised to snap two days of gains

  • The Hang Seng Index fell 0.2 per cent to 24,958.28 at the noon break, after gaining as much as 0.5 per cent earlier
  • Evergrande’s shares rise 5.5 per cent, after it made interest payments on three dollar bonds, lifts other mainland developers

Hong Kong stocks fell after an initial boost from China Evergrande was erased by Tencent’s decline, putting the city’s benchmark index on course to end two days of gains. Investors’ concerns on rising inflation and a weakening Chinese economy weighed further on sentiment.

The Hang Seng Index lost 0.2 per cent to 24,958.28 as of noon local time, after gaining as much as 0.5 per cent earlier following reports that China’s most indebted developer had made interest payments on three bonds. China’s Shanghai Composite Index and the CSI300, which tracks the largest companies in Shanghai and Shenzhen, gained at least 0.6 per cent.

Chinese technology firms proved to be a drag on the Hang Seng Index. Tencent Holdings, the second largest constituent, was among the biggest losers, declining 3 per cent to HK$469.20. The WeChat operator on Wednesday posted its slowest quarterly growth in two years amid Beijing’s regulatory crackdown on Big Tech.

The Hang Seng Tech Index was little changed. Alibaba Group Holding retreated 1.7 per cent, while its health unit declined 1.8 per cent.

Investors, meanwhile, remain cautious as inflation persists. China saw producer prices climb 13.5 per cent to a 26-year high in October from a year earlier. Its consumer price index, a main gauge of inflation, rose 1.5 per cent last month, hitting a 13-month high. The Chinese economy has recorded slower growth in the past two quarters as it battles fresh waves of Covid-19 cases amid a power outage and a property market ensnarled in default woes.

Surging US inflation dragged down markets too, as its consumer price index rose at its fastest pace in three decades and was much stronger than expected, said Will Shum, portfolio management director at iFast Financial in Hong Kong.

“Investors are concerned about whether interest rate hikes will come much earlier than expected, and such fears drove down US stock markets,” said Shum, noting that its impact was felt in Hang Seng on Thursday.

Stocks had earlier gained after heavily indebted China Evergrande Group avoided a default, with media reporting emerging that the Shenzhen-based firm made interest payments on three dollar bonds. An index that tracks developers gained 1.7 per cent.

China Evergrande Group made interest payments on three bonds, lifting its shares

 

Evergrande’s shares rose 5.5 per cent. China Overseas Land was among the biggest gainers, jumping 5.1 per cent to HK$18.70, while Longfor Group and China Resources Land advanced at least 3.3 per cent.

“Thanks to news of Evergrande repaying its overdue coupons, the Chinese property sector made a strong rebound. Ping An Insurance also benefits given its huge exposure on equity investments in the property sector,” said Shum. Ping An Insurance gained 1.8 per cent.

Chinese banks also rose on reports that policymakers could ease controls on property developers to sell bonds in the interbank market. China had introduced the “three red lines” policy in August last year to curb debts in the real estate sector. China Merchants Bank rose 1.4 per cent.

Two stocks made their debut on the mainland exchanges. Zhejiang Oceanking Development, a chemicals manufacturer and distributor, gained 44 per cent to 8.63 yuan. Shandong Linuo Technical Glass, which produces and sells pharmaceutical glass packaging, surged 122 per cent to 28.87 yuan.

Other major gauges in Asia were mixed. Stocks in South Korea and Australia each retreated 0.6 per cent respectively, while the Japanese benchmark gained 0.5 per cent. US stock markets closed lower on higher-than-expected inflation figures.

Author: Cheryl Heng, SCMP

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