Hong Kong, China stocks slump in worst global sell-off since October as Covid-19’s impact weighs on corporate earnings

Stock benchmarks in major Asia-Pacific markets tumble by more than 1 per cent after cautions on corporate earnings outlook

The Fed keeps its policy rate unchanged without offering fresh monetary stimulus

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Floor traders at the New York Stock Exchange on March 18, 2020. Photo: AFP

Published: 10:58am, 28 Jan 2021Updated: 5:54pm, 28 Jan 2021

Hong Kong and mainland China stocks slumped, joining the sell-off in global markets as the ongoing coronavirus pandemic weighs on the financial results of the world’s companies from Facebook to Tesla.

The Hang Seng Index fell 2.6 per cent to 28,550.77 for a third day of declines, slipping from a 31-month high. The Shanghai Composite Index retraced 1.9 per cent to 3,505.18 while the benchmark in southern China’s technology hub Shenzhen fell 2.8 per cent to 2,352.75.

Asia-Pacific markets fell across the region as soon as trading commenced, taking their cues from the 2.6 per cent decline overnight in the S&P 500 and the Nasdaq index. European stocks fell by the most in five weeks, with the UK unveiling new rules to contain the spread of Covid-19 and Germany lowering its projection for economic growth in 2021.

Tesla missed estimates with its quarterly earnings for the first time since July 2019, prompting investors to question whether its stock price is worth more than 1,000 times earnings. The maker of electric cars was not alone in disappointing investors. Samsung Electronics’ profit missed analysts’ estimates amid competition in smartphone and memory chips markets. Facebook warned of “significant uncertainty” in 2021 while Apple also fell amid a cautious outlook of business from executives.

“Big earnings from Apple, Facebook, and Tesla failed to erase the overall bearish sentiment that is stemming from valuation concerns,” said Edward Moya, a strategist at Oanda.

Declines were seen in 42 of the 52 constituent stocks on the Hang Seng Index, led by the 7.6 per cent drop in Techtronic Industries and the 6.9 per cent fall in Geely Automobile Holdings. Tencent Holdings fell 2.9 per cent to HK$681, drawing a wider gap from being the first Asian company to reach US$1 trillion in capitalisation.