Hong Kong stocks slide as Alibaba’s earnings miss undercuts intervention-led rally, China’s deflation spooks investors

Alibaba Group’s report card for December quarter failed to impress investors, despite a US$25 billion increase in its buy-back programme

Consumer and producer prices in mainland China slumped again in January, the statistics bureau said on Thursday

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People walking outside the Exchange Square in Central, Hong Kong on January 19, 2024. Photo: Xiaomei Chen

Published: 11:00am, 8 Feb 2024Updated: 5:09pm, 8 Feb 2024

Hong Kong stocks fell, trimming gains in week, after a government report showed deflation in China’s consumer and producer prices deepened. Alibaba Group’s quarterly earnings trailed expectations, prompting analysts to cut their price targets. It has been the worst Year of the Rabbit on record.

The Hang Seng Index declined 1.3 per cent to 15,878.07 on Thursday, paring this week’s advance to 2.2 per cent. The Tech Index lost 0.7 per cent and the Shanghai Composite Index added 1.3 per cent.

Alibaba Group tumbled 6.1 per cent to HK$70.30 after both earnings and revenue in the December quarter fell short of market consensus. Its e-commerce rival JD.com slipped 2.6 per cent to HK$88. Tencent lost 1.7 per cent to HK$287.20 and WuXi Biologics tumbled 7.6 per cent to HK$17.72, giving up some of the surge on Wednesday.

Losses in Alibaba, the owner of this newspaper, mirrored the overnight slump in New York, after revenue grew slower than expected 5.1 per cent and earnings sank 69 per cent from a year earlier. The company separately boosted its stock buy-back war chest to US$35.3 billion through 2027.

At least six investment banks lowered their price targets for Alibaba’s Hong Kong-traded shares. Goldman Sachs cut its 12-month target by 14 per cent to HK$102 and JPMorgan Chase lowered it by 5 per cent to HK$100, according to Bloomberg data. Alibaba has lost about a quarter of its market value in the past six months.

“Although China keeps rolling out measures to support the economy and stocks, investors still need to guard against corporate earnings downgrades,” said Yan Zhaojun, an analyst at Zhongtai International. An improvement in macro data is needed for a lasting market rebound, Yan added.