Hong Kong stocks sink to lowest in 5 years on Ukraine conflict, Covid-19 deaths while China dials down GDP target

China’s biggest tech companies including Alibaba, Tencent, Meituan, Bilibili and XPeng fell to their lowest levels in at least one year
Lingering war in Ukraine and record Covid-19 death rate in the city stoked risk aversion, while China sets slowest GDP growth rate since 1991

China stock market

Zhang Shidongin Shanghai

Published: 10:16am, 7 Mar 2022

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Hong Kong’s stocks tumbled to the lowest level in more than five years on concerns inflation will deteriorate as the war in Ukraine enters its second week with sanctions against Russia set to widen. China set the lowest growth target in three decades.

The Hang Seng Index slumped 3.9 per cent to 21,057.63 on Monday, the lowest level since July 2016. The benchmark earlier sank more than 1,000 points in the biggest sell-off in seven months. The Tech Index retreated 4.4 per cent to a new low, while the Shanghai Composite Index lost 2.2 per cent.

Fifty-seven of the 66 Hang Seng Index members dropped. Meituan, WuXi Biologics and Haidilao plunged by at least 9 per cent. Some 393 stocks, or almost a fifth of the companies trading in the city, fell to their 52-week lows, including Alibaba Group Holding, Tencent to Meituan, Bilibili and XPeng.

“The war has driven commodities and grains higher and that will have a profound impact on the global economy,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “Economic recovery will be in doubt.”

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Local stocks also plunged as Hong Kong continued to record a big surge in Covid-19 infections, with the death rate hitting the highest worldwide. China on Sunday also reported the highest daily infections since the first outbreak in Wuhan in 2019.

Water-bottling firm Nongfu Spring tumbled 7.4 per cent while PC maker Lenovo Group lost 3 per cent. Both stocks became the Hang Seng Index constituents from Monday following a quarterly review last month.

03:59

Hong Kong public hospitals hanging by a thread amid surge of fifth-wave Covid cases

Asia-Pacific markets also took a beating as equity benchmarks in Japan, Taiwan and South Korea all retreated by more than 2 per cent. Crude oil topped US$120 a barrel, natural gas and grains all surged on concern about supply-chain bottlenecks. Gold futures surpassed US$2,000 an ounce, a 16-month high.

US Secretary of State Anthony Blinken said on Sunday America and its allies are looking into a coordinated embargo on Russian oil exports. Russian President Vladimir Putin said that the war will continue unless Ukraine surrenders.

01:25

China aims for modest 5.5% GDP growth in 2022, citing economic pressures

Meanwhile, Chinese Premier Li Keqiang set a 5.5 per cent target for economic growth in 2022 at the opening session of the annual legislative meeting over the weekend. The goal was the lowest since 1991 and below the “above 6 per cent” target for last year.

The modest target suggests policymakers could deliver stronger stimulus measures when the economy faces rising domestic and external uncertainties, according to JPMorgan Asset Management.

China will probably cut banks’ reserve requirement ratio by a full percentage point and interest rates by 50 basis points this year to counter policy tightening in the US, China Renaissance Securities said in a note on Monday.