Hong Kong stocks retreat as new year rally overheats while BYD erases decline after Buffett cutback

Local stocks took a breather after an 8.1 per cent rally in the opening days of 2023 pushed a technical indicator into overheated zone
BYD overturned an almost 3 per cent loss following news of Berkshire Hathaway’s further retreat from the Chinese EV maker

Hong Kong stock market

Mia Castagnone

Published: 10:29am, 10 Jan, 2023

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Hong Kong stocks dropped on concerns the market’s best start to a year in more than two decades is overdone, prompting traders to trim positions. BYD erased an almost 3 per cent slump following another Berkshire Hathaway’s selldown.

The Hang Seng index retreated 0.3 per cent to 21,331.46 at closing of Tuesday trading. The Tech Index dropped 0.3 per cent, while the Shanghai Composite Index lost 0.2 per cent.

Alibaba Group fell 0.6 per cent to HK$109.70 while JD.com lost 0.1 per cent to HK$249.80 and Meituan tumbled 1.1 per cent to HK$178.60. Developers Country Garden and Longfor, beneficiaries of Beijing’s support for the housing market, both declined by at least 2.4 per cent. Hotpot chain Haidilao fell 1.2 per cent to HK$24.05.

The city’s stock benchmark has rallied 8.1 per cent this year before today, driving its relative-strength index above 70, a level technical stock traders deemed as overbought and a signal to retreat.

“Some investors are choosing to pull back from the market after the recent rally as we approach the Lunar New Year holiday,” said Kenny Wen, head of investment strategy at KGI Asia in Hong Kong. “The market sentiment is still okay.”

03:47

First travellers arrive and depart from Beijing as China reopens international borders

China reopening and an end to tech-sector clampdown have fuelled risk appetite in the market, injecting optimism in the market outlook. The market’s strongest start to a year since 1999 has added US$265 billion of capitalisation in Hong Kong, and US$562 billion in mainland markets.

Alibaba Group’s 28 per cent surge this year has fuelled a 10 per cent gain in the Hang Seng Tech Index. The rally, however, has driven the Chinese e-commerce platform operator into a technically overbought zone, risking an imminent reversal.

Jack Ma’s ceding of control of Ant could signal Big Tech tensions are easing

Elsewhere, BYD rose 2.8 per cent to HK$207, swinging from an earlier loss of as much as 2.7 per cent. Traders likely focused on its expanding EV sales and ignored news about shareholding changes. Warren Buffett’s Berkshire Hathaway sold 1.06 million shares in the electric-car maker on January 3, the seventh cutback over the past six months.

Markets in the Asia-Pacific region were mixed. The Nikkei 225 in Japan added 0.8 per cent, while the Kospi in South Korea was little changed. The S&P/ASX in Australia dropped 0.3 per cent.