Hong Kong stocks slide by most in two weeks as China reopening bets unravel amid a flare-up in Covid cases

Stocks halted a three-week rally, after China reported the first Covid-related death in six months amid a flare-up
Tingyi and China Resources Mixc advanced, while Haier Smart Home slipped before their official inclusion into the Hang Seng Index on December 5

Hong Kong stock market

Jiaxing Li

Published: 10:14am, 21 Nov 2022

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Stocks in Hong Kong and mainland China tumbled as a flare-up in coronavirus cases undermined recent bets Beijing will roll back its stringent zero-Covid policy to spur the economy. Two of the three new benchmark index members gained.

The Hang Seng Index dropped 1.9 per cent to 17,655.91 at the close of Monday trading, the biggest setback in two weeks. The Tech Index lost 3 per cent, while the Shanghai Composite Index retreated 0.4 per cent.

Alibaba Group slipped 4.8 per cent to HK$76.15 while Tencent fell 1.6 per cent to HK$283.20 and Meituan plunged 4.9 per cent to HK$152.50. Casino operator Sands China sank 8 per cent to HK$18.06 while peer Galaxy Entertainment dropped 5.4 per cent to HK$43.40.

“China’s Covid situation remains gloomy after relaxing the control measures, as there have been several major outbreaks,” Lin Rongxiong, chief strategist at Shenzhen-based Essence Securities said in a note on Monday. The market is still debating whether the reopening policies will proceed to help arrest the slowdown, he added.

The recent rebound is technical in nature and driven mainly by short covering, strategists at JPMorgan Private Bank said in a report on Friday, adding that the “turning point” for Chinese stocks has yet to arrive. “We do not see long-only funds coming back to China meaningfully yet.”

The Hang Seng Index rose 3.9 per cent last week on the zero-Covid policy pivot and China reopening bets, taking the advance to 22 per cent from the lowest point in October and contributing to a US$701 billion gain in market capitalisation.

China stock rebound is ‘technical’ and likely to attract bears, JPMorgan says

China reported its first Covid-19 death in six months as the country battles its worst wave since Shanghai’s spring outbreak. Cases rose to 26,824 nationwide on Monday from 24,215 a day earlier, according to government data. Residents of multiple major Chinese cities have been urged to stay home to curb transmissions.

China’s State Council last week urged local authorities to avoid “irresponsible loosening” of Covid-19 measures as the nation faces the biggest outbreaks in six months.

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Elsewhere, real estate developers tumbled. Shanghai’s housing market continues to slump, with the wealthy middle class cashing out and leaving the country. Longfor slid 2.8 per cent to HK$19.54, while Country Garden lost 5 per cent to HK$2.48.

Two of the three new Hang Seng Index members advanced. Noodle maker Tingyi gained 2.9 per cent to HK$12.04 and China Resources Mixc Lifestyle Services added 1 per cent to HK$34.35, while Haier Smart Home lost 0.4 per cent to HK$24.35. The trio will join from December 5.

Software developer Ruijie Network jumped 15.8 per cent to 37.50 yuan per share on its first day of trading in Shenzhen.

Asian stocks retreated on Monday. The S&P/ASX 200 in Australia lost 0.2 per cent, the Kospi in South Korea dropped 1 per cent, while the Nikkei 225 in Japan added 0.2 per cent.