Hong Kong stocks slide on earnings shock as Geely, Galaxy add to disappointment while Meituan extends rebound

NetEase slipped before publishing its interim report, while Galaxy and Geely Auto post disappointing results
Reports from Tencent and bourse operator HKEX both underwhelmed on Wednesday, showing the impacts from economic slowdown

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:35am, 18 Aug, 2022

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Hong Kong stocks fell as traders braced for more corporate earnings disappointment after weaker-than-expected reports from industry bellwethers like Geely Auto and Galaxy Entertaintment amid an economic slump. Meituan extended a rebound.

The Hang Seng Index fell 0.8 per cent to 19,763.91 at the close, the lowest level in a week. The Hang Seng Tech Index lost 1.1 per cent, while the Shanghai Composite Index slipped 0.5 per cent.

Macau casino operator Galaxy retreated 2.1 per cent to HK$46.25 after posting HK$850.5 million (US$108.4 million) in interim loss. Geely Auto fell 3.1 per cent to HK$16.82 as first-half profits trailed market estimates. Developers Country Garden and China Overseas Land & Investment both fell by at least 2.9 per cent amid lingering concerns about China’s housing market slump.

Mobile game developer NetEase slid 1.6 per cent to HK$142 before its report card later on Thursday. Second-quarter profit probably increased 17 per cent from a year earlier, according to analysts tracked by Bloomberg.

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“The effects of pandemic flare-up and worries about a global recession are now being felt,” said Dang Chongyu, an analyst at Sealand Securities. “Hong Kong stocks may still need to digest all these headwinds and consolidate in the third quarter. The fourth quarter may be better for stocks when the negative factors fade.”

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China’s economy wobbled last quarter when growth slowed to 0.4 per cent from a year earlier versus 4.8 per cent in the preceding quarter amid sporadic lockdowns and a housing market slump. Gross domestic product shrank 1.3 per cent in Hong Kong, on top of a 3.9 per cent contraction in the first three months of the year.

Hong Kong’s bourse operator HKEX slipped 2 per cent to HK$334.40, after net income declined by 27 per cent in the company’s worst interim performance in five years.

Elsewhere, Meituan advanced 0.7 per cent to HK$171.10. Tencent called a Reuters report that it was planning to cut its stake in the food-delivery platform operator as “not accurate.” Tencent added 3.1 per cent to HK$312.60, even as revenue shrank last quarter for the first time since its 2004 listing and earnings missed expectations.

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Limiting losses, China Resources Beer jumped 4.8 per cent to HK$58.70 as the best performer on the Hang Seng Index after Citigroup and Morgan Stanley boosted their price targets, citing a shift to higher-margin premium products and better sales momentum.

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All the five mainland companies rose on their first day of trading. Union Semiconductor was the best performer, jumping 91 per cent to 16.94 yuan in Shanghai, while Beijing Haohan Data Technology logged the smallest gain, rising 20 per cent to 19.90 yuan. The other three, including Bona Film Group, all surged by 44 per cent.

Other major markets in Asia all headed south on Thursday, with Japan’s Nikkei 225 falling 1 per cent for the biggest decline. South Korea’s Kospi retreated 0.3 per cent, while Taiwan’s Taiex lost 0.4 per cent and Australia’s S&P/ASX 200 dropped 0.2 per cent.