Hong Kong stocks dragged down by HSBC’s worst slump since Brexit

HSBC plunges 5 per cent to HK$65.6 after weak earnings, its biggest fall since June 24 when the Brexit vote was announced

PUBLISHED : Tuesday, 21 February, 2017, 9:22am
UPDATED : Tuesday, 21 February, 2017, 10:11pm

Hong Kong stocks retreated from earlier gains to close lower on Tuesday, as heavily weighted HSBC shares recorded their biggest fall in eight months following disappointing earnings and a share buyback scheme that was smaller than expected, which offset a rally in Hong Kong property and mainland insurance sectors.

The Hang Seng Index ended 0.8 per cent or 182.6 points lower at 23,963.6 on Tuesday while the Hang Seng China Enterprises Index lost 0.4 per cent to 10,408.6.

Daily turnover in Hong Kong was HK$87.7 billion, up from HK$78.1 billion a day earlier.

HSBC, the most traded stock on Tuesday, saw its shares slump 5 per cent to HK$65.6 – the biggest drop since June 24 last year when the Brexit vote was announced, after it posted a worse-than-expected pre-tax profit drop of 62.3 per cent and announced a US$1 billion share buyback scheme, which also disappointed investors who were expecting more.

Hong Kong’s stock market will be driven by company results in coming weeks, while investors may decide to take profits after the benchmark soared more than 10 per cent since the Christmas holidays, analysts said.

“Today’s drop was obviously dragged down by HSBC. From The Bank of East Asia to HSBC and Hang Seng Bank, recent company results to some extent hurt the short-term sentiment and people are now worried about the results of Standard Chartered,” said Kenny Wen Kit, wealth management strategist at Sun Hung Kai Financial.

AIA is likely to post robust results, but some investors may see it as a chance to take profit
Kenny Wen Kit, Sun Hung Kai Financial

“AIA is likely to post robust results, but some investors may see it as a chance to take profit. The daily turnover in Hong Kong has started to slide from the earlier peak,” Wen said.

Standard Chartered and Pan-Asia insurer AIA are scheduled to release annual results on Friday.

In the short term Wen expects the Hang Seng Index to hover around 23,800 to 24,364 – the latter being its recent high on September 9.

Among other major movers, Hang Seng Bank, majority owned by HSBC, inched up 0.1 per cent to HK$163.3, after posting a 41 per cent drop in its annual net income, also below market expectations.

Shoe retailer Belle International surged 8.6 per cent to HK$5.54 after Credit Suisse upgraded its rating for the stock and raised the target price by nearly 60 per cent, projecting an improved earnings outlook in 2017.

China Life Insurance ended up 0.8 per cent to HK$24.5 after a Bloomberg report said China is considering loosening restrictions on foreign investment in domestic life insurers.

Local property stocks rallied ahead of the first budget from Hong Kong Financial Secretary Paul Chan Mo-po, which is expected to include plans for land sales. Sun Hung Kai Properties surged 3 per cent to HK$111.7 and Henderson Land Development edged up 1.4 per cent to HK$44.6.

On the mainland, the Shanghai Composite Index extended Monday’s rally to end at 3,253.33, up 0.4 per cent, the highest level since December 1 last year.

The CSI 300 Index – which measures the performance of large companies listed in Shanghai and Shenzhen – increased 0.3 per cent per cent to 3,482.82.

The Shenzhen Component Index gained 0.7 per cent to 10,405.75 while Nasdaq-like ChiNext surged 1.4 per cent to 1,921.08.