Hong Kong stocks hover around three-week high as Micron probe, weak earnings sap risk appetite

The investigation of Micron is the first ever into a foreign company by China’s internet regulator

Profits declined at 93 per cent of the companies in the MSCI Asia-Pacific Index in the fourth quarter, Goldman Sachs says

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People walk past a screen displaying stock data at Exchange Square in Hong Kong on March 10, 2023. Photo: AP

Published: 10:33am, 3 Apr 2023Updated: 4:45pm, 3 Apr 2023

Hong Kong stocks hovered around a three-week high on concern China’s cybersecurity probe into US memory-chip maker Micron Technology will escalate tensions between Beijing and Washington and as a slew of earnings disappointments sapped risk appetite.

The Hang Seng Index rose less than 0.1 per cent to 20,409.18 at the close, after falling as much as 0.9 per cent. The Hang Seng Tech Index shed less than 0.1 per cent, and the Shanghai Composite Index added 0.7 per cent.

ErnieBot developer Baidu slumped 2.1 per cent to HK$145.60 after Italy started an investigation into OpenAI, the operator of ChatGPT, for data privacy and suspended data collection by the platform. Alibaba Group Holding slid 1.8 per cent to HK$98.55, rival JD.com lost 1.3 per cent to HK$169.370 and Meituan retreated 2.4 per cent to HK$140. Chinese chip maker Semiconductor Manufacturing International Corp rallied 7.5 per cent to HK$20 on optimism that the Micron investigation will further boost the nation’s technology self-reliance.

“In equities, risks are skewed to the downside given the distinctly sub-trend growth combined with stubborn inflation,” said Sylvia Sheng, a strategist at JPMorgan Asset Management. “Earnings look set to deteriorate further, in turn making stocks vulnerable to bouts of multiple derating as market stress increases.”

The 928 companies on the MSCI Asia-Pacific Index excluding Japan, or 93 per cent of the total constituents on the gauge, posted a 22 per cent year-on-year profit decline for the fourth quarter, according to Goldman Sachs in a report released on Saturday. Full-year profits dropped 1 per cent, it said. Country Garden Holdings, Haier Smart Home and Citic were among the members of the Hang Seng gauge whose results trailed estimates last week.

In the latest sign of a flare-up in the China-US tensions, the Cyber Security Review Office under the Cyberspace Administration of China (CAC) said on Friday evening that it would launch a security review of Micron, the first ever into a foreign company by the Chinese internet regulator. The move is widely seen as China’s retaliation against US’s sanctions on technology exports to the Asian nation.

The headwinds may jeopardise a rally that drove the Hang Seng Index up by 3.1 per cent in the first quarter on optimism that Beijing’s regulatory crackdown on technology firms had run its course, while a sweeping overhaul of Alibaba’s business structure was seen boosting the valuation of the e-commerce giant.