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People walking near a screen showing the Hang Seng Index chart outside a bank branch in Mong Kok, hong Kong. Photo: Sam Tsang
BusinessChina Business

Hong Kong stocks slip in worst January since 2016 on BYD earnings miss, weak China data while Evergrande units recover

  • Hang Seng Index has lost 7.9 per cent so far this month in the market’s worst start to a year since 2016
  • BYD’s preliminary earnings trailed market consensus, while forecasts on Chinese manufacturing suggests continued weakness in the economy
Hong Kong stock market
Zhang Shidong
Zhang Shidongin Shanghai
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Hong Kong stocks tumbled and the benchmark index headed for the worst January since 2016 amid renewed concerns about corporate earnings and China’s economic recovery outlook. EV maker BYD slumped after profits trailed market consensus.

The Hang Seng Index fell 2.3 per cent to 15,703.45 on Tuesday. The Tech Index slipped 3.3 per cent and the Shanghai Composite Index retreated 1.8 per cent. The Hang Seng Index has lost 7.9 per cent so far this month, set for the worst start to a year since a 10 per cent slide in the first month of 2016.

Alibaba Group dropped 2 per cent to HK$71.15, and Tencent slid 2.9 per cent to HK$273.80 while Baidu fell 1.6 per cent to HK$103.40. Wuxi Biologics slipped for a third day, losing 3.5 per cent to HK$22.35. BYD sank 4.4 per cent to HK$177.90 after 2023 earnings missed estimates. Its peer Li Auto declined 1.6 per cent to HK$107.60.

“The key hurdle for the market is investors’ pessimism about the economy and their worsening expectations about the macro policies,” said Zheng Xiaoxia, an analyst at Hua An Securities. The size of policy support or improvement in the economy, remains uncertain for now, Zheng added.

This week’s pullback is a reality check to the rally fuelled by feel-good sentiment last week, when China has stepped up efforts with liquidity injection and market support measures. While the majority of investors are bullish, a significant portion of Goldman Sachs’s clients still viewed the market as “uninvestable” citing geopolitical tensions, domestic politics and deflationary pressure.

China’s stimulus lifts stocks in short-lived rally as geopolitics weighs

Strategists at HSBC cut their 2024 targets for major onshore stock indices by 6 to 13 per cent in a January 26 report, saying they were “too optimistic about corporate earnings” as the market suffered several rounds of earnings downgrades since November last year.

Meanwhile, China Evergrande Group’s listed units rebounded from a sell-off on Monday. Evergrande New Energy Vehicle Group rallied 4.4 per cent to HK$0.239, and Evergrande Property Services Group surged as much as 9 per cent before closing 3.9 per cent lower at HK$0.375. China Evergrande Group remains suspended from trading as liquidators took control of its operations.

Economic data this week may disappoint again. China’s manufacturing probably contracted for a fourth consecutive month in January, according to the consensus among economists tracked by Bloomberg. The official PMI report is due on January 31.

Elsewhere, machinery maker RIAMB Technology Development soared 118 per cent to 46.40 yuan on the first day of trading in Shanghai.

Other major Asian markets were mixed. Japan’s Nikkei 225 added 0.1 per cent and Australia’s S&P/ASX 200 rose 0.3 per cent, while South Korea’s Kospi slipped 0.1 per cent.

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