Alibaba, BYD drag Hong Kong stocks to six-week low as Covid-19 cases, tech fines crimp optimism

China’s zero-Covid policy and regulatory crackdown continue to be tough hurdles for a sustained recovery in stocks

Latest penalties on Alibaba, Tencent, Bilibili and others deliver new shock just as investors are letting down their guard with bullish tones for the second half

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Pedestrians walk past a stock ticker outside the Exchange Square in Central, Hong Kong on July 11. Photo: EPA-EFE

Published: 10:45am, 12 Jul 2022Updated: 5:20pm, 12 Jul 2022

Hong Kong’s stock benchmark slumped to the lowest in more than six weeks amid a surge in coronavirus cases in Shanghai as China’s zero-Covid policy and tech-sector crackdown continue to subject any market recovery to sudden shocks.

The Hang Seng Index retreated 1.3 per cent to 20,844.74 at the close of Tuesday trading, the lowest level since May 27. The Tech Index lost 2.1 per cent, while the Shanghai Composite Index fell 1 per cent.

Alibaba Group Holding, the owner of this newspaper, sank 5.4 per cent to HK$107.80, while Country Garden Holdings lost 3.4 per cent to HK$4.01. Tencent weakened 1.3 per cent to HK$337.80 and Meituan fell 2 per cent to HK$178, while Wuxi Biologics retreated 2.9 per cent to HK$74.85.

Shanghai reported 59 new infections on Monday, a sharp rise from single digits a week ago before the detection of the more contagious Omicron variant. President Xi Jinping has recently reaffirmed the zero-Covid approach to protect lives at the expense of short-term economic growth.

“The zero-infection policy doesn’t work and it is hurting the economy, [any market recovery will] continue to be buffeted” by this strategy, said Francis Lun, chief executive at Geo Securities. “[We] should be very pessimistic about the Chinese economy,” he added.

Stocks also slipped as the Hang Seng Index and MSCI China Index returned to bull-market territory, with investors spooked by yet another round penalty on Chinese internet-platform operators including Alibaba and Tencent for past regulatory missteps.