Hong Kong stocks dropped as China reopening bets waned amid weak corporate earnings outlook and concerns that the spy balloon incident will heighten US-China tensions and provoke new sanctions against Chinese companies. The Hang Seng Index fell 2 per cent to 21,222.16 at the closing of Monday trading, while the Tech Index lost 3.7 per cent and the Shanghai Composite Index retreated 0.8 per cent. Alibaba Group lost 3 per cent to HK$102.90, and Tencent dropped 2.5 per cent to HK$375.20. Baidu tumbled 2.9 per cent to HK$140.60, and JD.com slumped 3.9 per cent to HK$221.80. Developer Country Garden slid 3.6 per cent to HK$2.70. Macau casino operator Sands China lost 2.6 per cent to HK$28.10. The city’s benchmark stock index lost 4.5 per cent last week, the most since late October. Mainland investors sold HK$17.5 billion (US$2 billion) worth of Hong Kong-listed stocks last week, bringing the net outflows this year to about US$500 million, according to Stock Connect data. The US shot down a Chinese balloon with surveillance and payload gear it accused of spying on key military sites, the government said on Saturday, while Secretary of State Antony Blinken postponed his China trip. China said it was a stray civilian vessel blown off course, and has vowed to retaliate. The US has recently moved to limit China’s access to advanced semiconductor technology by restricting US companies from exporting their hi-tech goods to mainland China. It has also roped in allies Japan and the Netherlands to restrict the sale of advanced equipment. “Some investors are cashing out after profiting from the powerful rally during the past few months,” Zhang Qiyao, strategist at Industrial Securities said in a research note on Monday. The market is also expecting underwhelming earnings reports against the backdrop of weak economic data, he added. Almost 60 per cent of Chinese companies lost money in 2022, the highest in at least a decade, according to data compiled by Industrial Securities last week, based on reports released so far this year. The combined revenue of Big Tech firms – including Alibaba Group and Tencent, dropped for the first time in 2022, according to government data. China Hongqiao, the world’s largest aluminium producer, warned net profit could decrease 40 per cent in 2022. It crashed 4.5 per cent to HK$8.48, the biggest drop since November last year. Elsewhere, SenseTime surged 6.4 per cent to HK$3. China’s biggest artificial intelligence company said it agreed to collaborate with King Abdullah Financial District and Sela, a cultural tourism event management company in Saudi Arabia, in areas including smart city and digital tourism. Asian markets were mixed. The Nikkei 225 index in Tokyo jumped 1.1 per cent, while the benchmark indices in South Korea and Australia dropped by 0.3 per cent to 1.2 per cent.