Hong Kong stocks snap six-week rally on tech retreat as Chinese funds exit overcrowded bets

The Hang Seng Index halted a 17 per cent rally over the preceding six weeks as mainland funds sold local stocks every day this week via the Stock Connect link

Alibaba Group, JD.com and Tencent were among big tech decliners, while BYD suffered after another selldown by Berkshire Hathaway

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A pedestrian looks at the electronic screen displaying the stock price of Hang Seng Index members outside a bank branch in Mong Kok, Hong Kong. Photo: Winson Wong

Published: 10:47am, 3 Feb 2023Updated: 4:25pm, 3 Feb 2023

Hong Kong stocks slipped, sending the market to its first week of losses in seven, as investors scaled back their holdings amid concerns about short-term earnings and valuations while the local currency weakened.

The Hang Seng Index fell 1.4 per cent to 21,650.31 at the close, taking the setback this week to almost 5 per cent following a cumulative 17 per cent advance in the previous six weeks. The Tech Index tumbled 1.3 per cent on Friday, snapping a five-week rally. The Shanghai Composite Index retreated 0.7 per cent.

Alibaba Group lost 3 per cent to HK$105.70, while JD.com slumped 2.6 per cent to HK$233.20 and Meituan declined 2.4 per cent to HK$172.40. BYD dropped 2.9 per cent to HK$254.40 after Berkshire Hathaway cut its stake in the electric carmaker again. HSBC sank 3.5 per cent to HK$55.65, while Macau casino operator Sands China fell 1.5 per cent to HK$28.70. Developer Country Garden lost 3.1 per cent to HK$2.82.

Mainland funds sold more than HK$604 million (US$77 million) worth of Hong Kong-listed stocks as of midday on Friday, taking their net selling this week to HK$17.5 billion, according to Stock Connect data. They have sold every day since returning from the Lunar holiday on January 30.

“The local stock market will pull back slightly today” because of the risk of fund outflows, said Dickie Wong, executive director at Kingston Securities. The bigger rate hikes in European countries are also part of the reason why the Hong Kong dollar is losing steam, he added.

The European Central Bank and the Bank of England both raised their key rates by 50 basis points overnight, versus a quarter-point move by the US Federal Reserve. That could pressure the Hong Kong dollar, which has weakened 0.4 per cent against the US dollar this year, according to Bloomberg data.