Hong Kong stocks retreat as Alibaba’s scrapping of logistic unit IPO weighs on sentiment, yuan weakness eyed

Alibaba Group Holding has decided to withdraw the IPO for its logistics operation Cainiao in Hong Kong which would have unlocked value for its shareholders

The yuan weakened tracking the yen’s slump to a 34-year trough, which analysts say could trigger further weakness in the yuan to maintain China’s export competitiveness

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Published: 10:51am, 27 Mar 2024Updated: 5:00pm, 27 Mar 2024

Hong Kong stocks slid, taking the market benchmark to near a three-week low, as the mood soured after the abrupt cancellation by Alibaba Group Holding of the Hong Kong listing plans for its logistics unit and a warning from electric vehicle maker BYD. Sentiment was also downbeat as the yen’s decline to a 34-year low sparked worries about a possible depreciation in the yuan to maintain China’s export competitiveness.

The Hang Seng Index fell 1.4 per cent to 16,392.84 at the close. The Hang Seng Tech Index dropped 2.3 per cent and the Shanghai Composite Index retreated 1.3 per cent.

Trading was light ahead of the Easter holiday break on Friday and Monday. Trading volumes on the Hong Kong exchange was almost 30 per cent below the 30-day average, according to Bloomberg data.

Sentiment on Chinese assets also worsened, as the slide in the Japanese yen to a 34-year low against the US dollar increased the pressure on the yuan to depreciate to retain its export competitiveness.

Alibaba, which has an 8.3 per cent weightage in the benchmark as the second-largest constituent, dropped 2.1 per cent to HK$68.80 after withdrawing the listings application for Cainiao. It instead unveiled plans to buy the remaining shares from the unit’s minority shareholders “to double down on its investment in Cainiao”, given the unit’s “strategic importance” in a move that could entail cash burn without unlocking value for its shareholders.

“The company originally wanted to separately list Cainiao in the Hong Kong market to unlock value for Baba shareholders,” said Nomura analysts in a note. “However, management conceded that the challenging capital market made this plan very difficult to implement.”