Hong Kong stocks: lack of earnings momentum risks derailing sentiment-driven rebound, analysts say

Chinese state intervention has tentatively put a floor under stocks, but corporate earnings show little sign of providing upwards momentum

‘Pressure is building up for some investors to pocket the profits from the decent gains the market has made,’ Guorong Securities analyst says

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The uptick in the Hang Seng Index is at risk of stalling after it climbed 11 per cent from a low in late January. Photo: Sun Yeung

Published: 2:03pm, 1 Apr 2024

Hong Kong stocks are priced for perfection and vulnerable to shocks, according to analysts. A stream of unimpressive earnings announcements could end the two-month rebound in Asia’s third-largest stock market as investors struggle to find fresh catalysts.

The uptick in the Hang Seng Index is at risk of stalling after it climbed 11 per cent from a low in late January. While Chinese state intervention has tentatively put a floor under stocks, corporate earnings show little sign of providing any upwards momentum.

With all 82 members of the Hang Seng Index having released full-year profits for 2023, results trailed analysts’ consensus estimates by 3 per cent, according to Bloomberg data. The property, raw-materials and industrial sectors delivered the biggest disappointments.

The absence of strong earnings adds to investors’ concerns about the sustainability of the rebound, which has largely been fuelled by an improvement in mood in response to state buying and curbs on short-selling and quant investments. A prolonged slump in home sales and a lack of forceful stimulus measures from the National People’s Congress (NPC), the annual legislative meeting that concluded last month, have heightened jitters about a recovery in earnings growth.

“The market will be more focused on how listed companies can deliver on earnings expectations now,” said An Qingliang, an analyst at Guorong Securities.

“The policies from the NPC are below expectations. So the earnings performance is particularly important at a time when pressure is building up for some investors to pocket the profits from the decent gains the market has made.”