Hong Kong stocks slip as Meituan slumps amid competition while traders reassess Fed view on higher rates

Weaker vehicle sales added to signals China’s corporate earnings will take time to recovery from lingering Covid-19 impact on consumption
US interest rates need to be higher to control inflation given a red-hot labour market, Fed Chair Powell says

Hong Kong stock market

Jiaxing Li

Published: 10:45am, 8 Feb 2023

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Hong Kong stocks declined as Chinese tech companies languished amid worries about corporate earnings and fund outflows, while investors reassess rate outlook after the Federal Reserve said borrowing costs would need to keep rising to put a lid on inflation.

The Hang Seng Index dropped 0.1 per cent to 21,283.52 at the close of trading on Wednesday. The Tech Index lost 1.9 per cent and the Shanghai Composite Index declined 0.5 per cent.

Meituan crashed 6.1 per cent to HK$153.70 and Alibaba Group slipped 1.2 per cent to HK$103.50, following reports that TikTok’s parent company ByteDance is planning to launch a delivery platform to rival market leaders. Alibaba Health tumbled 3.8 per cent to HK$6.10 and carmaker BYD weakened 2.2 per cent to HK$240 and peer Geely Auto slid 3 per cent to HK$11.72.

Limiting losses, HSBC advanced 2 per cent to HK$57.75 and New World Development jumped 2.1 per cent to HK$24.05, while Chinese developer Longfor Group rose 1.4 per cent to HK$24.95.

Mainland funds were net sellers of Hong Kong-listed stocks on Wednesday, taking HK$3.6 billion (US$458 million) off the table, according to Stock Connect data.

“The optimism is waning,” Zheng Jianxin, an analyst at ITG Futures in Xiamen, said in a research note. China’s economic recovery turns out to be weaker than what the market wants, and the US labour market is still strong, which increases the risk of excessive interest rate hikes, he added.

The Hang Seng Index has struggled this month to extend a 45 per cent rally from late October as fatigue sets in. Renewed US-China geopolitical tensions prompted traders to check risk-taking, while data showed earnings from Chinese companies are likely to take more time to recover.

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Reports this week showed mainland vehicle sales in holiday-shortened January fell 41 per cent from a year earlier, the industry association said. Great Wall Motors and Geely Auto reported weaker data.

There were more negative profit alerts in nine of the 11 sectors so far in the fourth quarter reports, according to data compiled by Goldman Sachs, with property and diversified financials dominating the warnings. The US bank expects Chinese companies to post a 3 per cent drop in earnings from a year earlier.

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Elsewhere, Baidu tumbled 2.7 per cent to HK$158.10, as traders deemed its 15 per cent surge on Tuesday as excessive without fundamental backing. SenseTime dropped 6.9 per cent to HK$2.68 after SoftBank Group trimmed its stake earlier this month, according to a stock exchange filing.

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Federal Reserve Chair Jerome Powell’s comment also tempered optimism the central bank will continue to downshift. “It kind of shows you why we think this is a process that will take a significant period of time,” Powell said in Washington on Tuesday. “We have a significant road ahead to get inflation down to 2 per cent.”

Three stocks debuted on Wednesday. Household appliance maker Globe Jiangsu surged 24 per cent to 38.30 yuan and silicon dioxide producer Guangzhou Lingwe Technology surged 29 per cent to 43.35 yuan in Shenzhen. Harvest Jingdong Warehouse jumped 12 per cent to 3.92 yuan in Shanghai.

Asian markets were mixed with the Kospi in South Korea gaining 1.3 per cent and the S&P ASX 200 index in Australia adding 0.4 per cent. The Nikkei 225 index in Japan dropped 0.3 per cent.