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A man walks past a screen displaying the Hang Seng stock index outside Hong Kong Exchanges on July 19, 2022. Photo: Reuters

Tencent, SMIC, PetroChina lead stock slide in Hong Kong on weak China data while US delisting risk, Taiwan tensions keep brewing

  • Data on July industrial production and retail sales came in below consensus estimates while US delisting risk and Taiwan tensions remain in focus
  • Li Auto and Sunny Optical both retreat before releasing their latest set of results later Monday
Stocks weakened in Hong Kong after factory production and retail sales in China trailed market expectations, underscoring a fragile economic recovery amid Covid-19 lockdowns and a housing slump. US delisting risk and cross-strait tensions returned.

The Hang Seng Index dropped 0.7 per cent to 20,040.86 at the close, retreating from a one-week high. The Hang Seng Tech Index swung to a 1 per cent loss from an almost 1 per cent gain, while the Shanghai Composite Index fell less than 0.1 per cent.

Tencent Holdings slid 1.3 per cent to HK$300.40 while chip maker SMIC slumped 6.1 per cent to HK$16.04 and China Merchants Bank slipped 2.2 per cent to HK$40.75. PetroChina, China Life Insurance and China Petroleum & Chemical Corp were also among the worst performers, losing from 2.4 per cent to 3.4 per cent after they opted to delist from the New York Stock Exchange.
Industrial production rose 3.8 per cent in July from a year earlier, while retail sales climbed 2.7 per cent, the statistics bureau said on Monday. The pace slowed from June, and also missed consensus estimates of 4.6 per cent and 5.3 per cent, respectively. Growth in fixed-asset investment slowed.

“China’s economy is struggling, particularly in the property market, which is a big drag on growth,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “You cannot expect a pickup in stocks for the rest of the year, unless the government loosens its pandemic policies aggressively.”

Sentiment remained fragile even after the People’s Bank of China unexpectedly cut interest rates on one-year medium-term lending facilities (MLF) by 10 basis points, the first reduction since January.

Data released by the central bank after the market close on Friday showed that aggregate financing, a broad measure of credit, increased by the least since comparable data began in 2017 as consumer and business confidence cracked.

“Although policymakers have ramped up stimulus measures, poor housing market dynamics, weak domestic demand, an impending contraction in exports and the zero-covid policy will limit the effectiveness of these efforts,” strategists at BCA Research said in a report on Monday.

Covid-19 new infections continue to climb, roiling the world’s second-largest economy. Authorities earlier this month locked down Sanya, a resort city on the southern island of Hainan. The city of Yiwu, a retailing hub in the eastern province of Zhejiang, was also placed under a quasi-lockdown.

Cross-strait tensions also remain elevated after US lawmakers landed in Taiwan for a two-day visit. The trip could incur China’s wrath again, after a visit by US House Speaker Nancy Pelosi sparked live-fire military drills and sanctions by Beijing.

Elsewhere, electric-car maker Li Auto slumped 1.3 per cent to HK$124.70 while Sunny Optical weakened 2.2 per cent to HK$120.50. Both are due to report their latest set of earnings later on Monday.

JWIPC Technology, an electronic product maker, surged by 44 per cent to 24.28 yuan on the first day of trading in Shenzhen. HK Acquisition Corp, a SPAC controlled by the city’s former monetary authority chief and off-limits to retail traders, was untraded.


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Other major markets in Asia all rose, with Japan’s Nikkei 225 being the best performer with a 1.1 per cent gain. Taiwan’s Taiex added 0.8 per cent and Australia’s benchmark advanced 0.5 per cent while markets in South Korea are shut for a holiday.