Hong Kong’s stocks plunge into bear market realm as key index posts biggest weekly slump in 17 months amid China’s crackdowns

Meituan and Alibaba extend declines, health care technology companies plunge
China Telecom surges on Shanghai trading debut as mainland’s biggest IPO for over a decade

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Iris Ouyangin Shenzhen

Published: 10:25am, 20 Aug 2021

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Hong Kong’s benchmark Hang Seng stock index entered a bear market on Friday as a rout in technology shares deepened amid China’s continuing regulatory crackdown on the sector.

The Hang Seng Index lost 1.8 per cent to close at 24,849.72 on the day, plunging 20 per cent since its mid-February peak, meeting the definition of a bear market. The gauge also recorded its worst weekly slump in 17 months, having shed 5.8 per cent for the week. So far this year, the benchmark has been the world’s third-biggest loser out of 92 major global indexes.

The Hang Seng Tech Index dropped 2.5 per cent and slumped by 10.5 per cent for the week, its biggest weekly decline since the week ending on February 26. Year to date, the gauge was down 30 per cent.

In mainland China, the Shanghai Composite Index dipped 1.1 per cent to 3,427.33.

“The most important factor that’s weighing on the market is regulation. People are not sure where the bottom is,” said Castor Pang, head of research at investment services firm Core Pacific-Yamaichi. “There will be more foreign funds dumping technology stocks.”

The once high-flying Chinese technology firms have been hit hard as investors flee Beijing’s regulatory crackdown. Going beyond the initial antitrust policy tightening against technology giants, the government has swiftly moved to reduce the burden of schoolchildren and parents by cracking down on the education technology segment. It has also moved to protect the rights of workers such as those in the food delivery sector.

China’s state media continues to pressure internet platforms. Securities Daily demanded online ride-hailing service firms give up on high profits, after the country’s Ministry of Transport on Wednesday asked these firms to improve their pricing strategies and cap commission rates.

On Friday, health care technology firms joined the downward trend after People’s Daily said that the methods of diagnoses, prescriptions and use of medicine on health care technology platforms needed to be improved to ensure safety. Alibaba Health Information Technology plunged 13.3 per cent, leading declines among all Hang Seng Index constituents, and both Ping An Healthcare and Technologyand JD Health fell by 14.4 per cent.

Pharmaceutical companies also were among the biggest losers. CSPC Pharmaceutical Group fell 7 per cent and Wuxi Biologics lost 7.5 per cent.

Meituan fell 4.5 per cent and Alibaba Group Holding, the owner of this newspaper, retreated 2.6 per cent. Tencent Holdings rose 1 per cent after fluctuated between gains and losses during the day.

Traders were uncertain about how far Beijing’s crackdown will go, which has propelled analysts to downgrade the prices of stocks in anticipation of more regulatory action. The market might not bottom out until the government restores trust among global investors, they said.

China Telecom jumped 34.9 per cent on its trading debut in Shanghai, but dropped 4.8 per cent in Hong Kong. The company, which is China’s largest fixed-line operator, had its shares delisted in the US together with China Unicom, China Mobile and CNOOC, China’s dominant offshore oil and gas producer, as part of the trade war between the world’s two largest economies.

Shanghai HeartCare Medical Technology plunged 24.6 per cent on its debut in Hong Kong.

Staying in Hong Kong, China Evergrande Group lost 1.6 per cent after the company issued two announcements overnight. It said the company had held initial talks with Xiaomi about introducing it as a strategic investor. Evergrande was responding to media reports that said it was talking with Xiaomi about selling a 65 per cent stake in its electric vehicle unit. Evergrande New Energy Vehicle Group jumped 5 per cent on the news.

The troubled property developer also stressed that it would make sure projects under construction were delivered and that it would guarantee their quality. Evergrande Property Services Group also advanced, rising 0.2 per cent.

Xiaomi lost 2.3 per cent after the company said that it had been in touch with some carmakers. It had not made any decisions about cooperation with anyone, according to its statement on China’s Twitter-like Weibo on Friday.

Meanwhile, Beijing kept its benchmark lending rates for companies and households unchanged for a 16th consecutive month. The one-year loan prime rate (LPR) remained at 3.85 per cent, while the five-year LPR was at 4.65 per cent.