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Additional fundraising by Xiaomi, a large cap stock, is affecting market sentiment, leading to declines, an analyst says. Photo: Shutterstock

Hong Kong and China stocks slip after Xiaomi’s US$4 billion fundraising dents sentiment

  • Hang Seng Index and Shanghai Composite both slipped 0.1 per cent on Wednesday
  • Xiaomi recorded its biggest plunge in three weeks, declined 7.1 per cent
Stocks

Hong Kong and China stocks slipped on Wednesday, led by a plunge in the shares of Chinese smartphone maker Xiaomi after it raised US$4 billion in the biggest ever top-up fundraising in Hong Kong.

The Hang Seng Index slipped 0.1 per cent to 26,532.58, after gaining 0.9 per cent on Tuesday. The Shanghai Composite also slipped by a similar margin after its biggest daily gain in three weeks the previous day. The Hang Seng Tech Index dropped 1.7 per cent.
Placements, or additional fundraising, by large cap stocks Xiaomi and BYD affected market sentiment on Wednesday, adding pressure to the Hong Kong and China markets, said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai.

“Companies with high capital expenditure issue extra shares, especially when stock prices are at relatively high levels. The news will be negative for stock prices, at least in the short term. This will be one of the investment risks for short-term traders [to watch for],” he added.

Xiaomi led losses among blue chips on the Hang Seng Index, sinking 7.1 per cent to HK$24.30, its biggest plunge in three weeks, after its shares resumed trading at 1pm. Trading in its shares was halted in the morning session pending a sale of shares and convertible bonds aimed at raising US$4 billion.
Chinese electric carmaker BYD also announced in an overnight filing that it had submitted an application to the China Securities Regulatory Commission for the issuance of additional shares on the Hong Kong bourse. Its shares plunged 7.9 per cent, their biggest drop in three weeks.

Other technology stocks dropped as well. Chinese food delivery company Meituan-Dianping fell 3.9 per cent, while JD.com declined 2.9 per cent.

The existing shares of WuXi Biologics, which is researching coronavirus drugs, fell 4.6 per cent, while new shares that emerged after a stock split last month slipped 1.5 per cent.
The shares of HSBC, Asia’s and Europe’s largest bank, bucked the trend, gaining 3.7 per cent to HK$42.50. The bank has gained by more than half in the past two months, as positive news about several Covid-19 vaccines has rekindled an appetite for old economy stocks that are likely to pick up once the pandemic recedes.

Other banks also gained. Standard Chartered rose 3.3 per cent, while Hang Seng Bank gained 1.7 per cent.

In the afternoon on Wednesday, the United Kingdom became the first country globally to approve the Pfizer-BioNTech Covid-19 vaccine for use, and said that it will be rolled out from early next week.

Overnight, Wall Street indices hit record highs on the progress of fiscal stimulus measures and optimism around coronavirus vaccines, according to Reuters. The Dow Jones Industrial Average rose 0.6 per cent to end at 29,823.92 points, while the S&P 500 gained 1.1 per cent to 3,662.44. The Nasdaq Composite climbed 1.3 per cent to 12,355.11.

The shares of five companies made trading debuts on Hong Kong and mainland bourses. In Hong Kong, Evergrande Property Services Group, the property management unit of developer China Evergrande, fell 0.2 per cent to HK$8.78 from its initial public offering (IPO) price of HK$8.80.

In Shenzhen, dairy product manufacturer Shanghai Hi-Road Food Technology soared 104.9 per cent to 143.50 yuan from its listing price of 70.03 yuan, while smart controller manufacturer Shenzhen Longtech Smart Control shot up 191.7 per cent to 164.85 yuan from its IPO price of 56.52 yuan.

In Shanghai, smart logistics systems solution provider BlueSword Intelligent Technology gained 137.4 per cent to 65.75 yuan from its listing price of 27.70 yuan, and drugs developer Shanghai Allist Pharmaceuticals rose 69.6 per cent to 38.55 yuan from its listing price of 22.73 yuan.

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