Hong Kong stocks extend losses as Ukraine war feeds recession risks while city lockdown, tech crackdown concerns linger

Sell-off on Hong Kong stocks deepened as Tencent and NetEase slid after China’s political delegates proposed tightening control over the gaming industry

Hang Seng Index members traded at the widest discount to book value in at least a decade; Alibaba bucked the sell-off with a rebound from record low

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Stocks succumbed to another bout of selling amid worries over recession, lockdown and tech crackdown. Photo: Xinhua

Published: 10:37am, 8 Mar 2022Updated: 12:36pm, 9 Mar 2022

Hong Kong stocks fell from a five-year low on concerns the Russia-Ukraine war will drag the global economy into a recession. Investors fretted about a lockdown in the city as markets regulator called for businesses to ensure continuity.

The Hang Seng Index lost 1.4 per cent to 20,765.87 at the close of Tuesday trading. The index slumped 3.9 per cent on Monday to the lowest since July 2016. The Tech Index weakened 3.2 per cent while the Shanghai Composite Index slid 2.4 per cent. Key markets in Asia-Pacific also retreated, following overnight losses in US equities.

More than half of the 66 Hang Seng Index members retreated, as BYD, Country Garden Services and China Resources Beer slumped more than 8 per cent. Game developers Tencent fell 1.2 per cent and NetEase lost 2.3 per cent after delegates at China’s annual legislative meeting proposed to further tighten its grip on the industry.

Bucking the overall weakness, Alibaba Group Holding, the owner of this newspaper, recovered from its all-time low with a 0.9 per cent advance to HK$96.90.

Investors are reassessing the risks of runaway inflation and recession as prices of commodities and grains from nickel to wheat hit record highs. Crude traded above US$120 a barrel, the highest since 2008, while Russia threatened to disrupt gas supply in Europe.

“The Russia-Ukraine conflict is unleashing a stagflationary impulse on the global economy,” Chen Zhao, chief global strategist at Montreal-based Alpine Macro said in a report. “This could be followed by a recession as oil prices soar and central banks tighten policy.”

Energy crises have often been the key conduit through which wars impact the global economy and financial markets. Source: Alpine Macro

The spectre of citywide lockdown appears to unsettle trading and business continuity. Hong Kong reported more than 20,000 new Covid-19 cases on Monday, after a week of over 50,000 infections. The stock exchange operator pledges to keep markets fully functioning “whatever the prevailing environment.”