Hong Kong stocks dive as yuan plumbs four-month low, corporate earnings disappoint

Ping An Insurance reported its profit fell to a 5-year low amid weakness in asset management, tech businesses

The yuan weakened beyond the psychological important level of 7.2 against the US dollar, in a move seen as offering support to exporters

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Screens showing the index and stock prices outside Hong Kong Exchange Square (HKEX) in Central. Photo: Sun Yeung

Published: 10:46am, 22 Mar 2024Updated: 6:09pm, 22 Mar 2024

Hong Kong stocks dropped by the most in two weeks, with the benchmark ending the week in the red, after disappointing earnings from bellwether companies and the breach of a key support level by the yuan, battered investor sentiment.

The Hang Seng Index tumbled 2.2 per cent to 16,499.47 at close on Friday, for a 1.3 per cent weekly loss. The single-day decline was the steepest since March 5. The Hang Seng Tech Index slumped 3.6 per cent and the Shanghai Composite Index retreated 1 per cent.

Losses on stocks intensified, as the yuan weakened to below 7.2 per US dollar, a level not seen since November, after China’s central bank lowered the daily reference rate. Some traders say the move reflects Beijing’s intention to let its currency depreciate after an unexpected drop in the Japanese yen, which could undermine the competitiveness of Chinese exporters.

Ping An Insurance sank 5.8 per cent to HK$33.45 after full-year earnings slid to the lowest in five years in 2023. CK Asset Holdings plunged 11 per cent to HK$32.85 and CK Hutchison Holdings lost 2.6 per cent to HK$39.35 after the two Li Ka-shing owned companies reported lower profits for 2023.

“Weak earnings and earnings miss will now amplify the volatility particularly at a time when the pressure for profit-taking is increasing,” said Wu Kan, an investment manager at Soochow Securities in Shanghai. “Earnings strength is what investors best hope for to underpin the market now. But given the published results, and the macro picture, corporate earnings will mostly be sluggish and serve as no catalyst for the market.”

Sluggish earnings could further derail the rebound in the Hang Seng Index, which has risen 10 per cent from a January low through Friday. The recovery was supported by state-led buying and a pledge by the Chinese securities regulator to boost the quality of listed companies.