Tencent, Alibaba, BYD drag Hong Kong stocks to three-week low as China slowdown clouds market outlook

Official report on Sunday showed manufacturing contracted further in October amid commodity inflation, power shortage
Losses sustained despite a private survey of smaller manufacturers on Monday indicating a rebound in sentiment

Hang Seng Index

Cheryl Heng

Published: 10:54am, 1 Nov 2021

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Hong Kong stocks slipped to a three-week low on signs of deepening slowdown in China’s economy as commodity inflation and power crisis hit the nation’s largest manufacturers.

The Hang Seng Index declined 1 per cent to 25,116.72 at the close of Monday trading, hitting the lowest since October 12. The Hang Seng Tech Index retreated 1.7 per cent as Tencent Holdings paced losers. In China, the Shanghai Composite Index was little changed after earlier losing as much as 0.5 per cent.

Tencent and Alibaba Group Holding each lost more than 2 per cent, while Meituan retreated 0.8 per cent. Electric carmaker BYD slumped 3.2 per cent after raising US$1.8 billion from a stock sale amid an earnings setback.

“We are seeing weakness across China’s markets,” said Edison Pun, senior market analyst at Saxo Markets. There are worrying signs on the Chinese economy, he added.

China’s economic recovery continued to lose momentum going into the final quarter as manufacturing among larger state-owned groups shrank for a second month in October by more than economists expected, the statistics bureau reported on Sunday.

The slide in the Hang Seng Index marked a fifth day of losses, the longest stretch since an eight-day streak ending July 8. Stocks remained depressed despite a survey released on Monday by Caixin showing manufacturing among smaller private companies grew in October at the fastest in four months.

Analysts forecast the world’s second-largest economy will grow at an annual rate of 3.8 per cent in the final quarter this year, versus a 4.9 per cent pace in the third quarter, according to Bloomberg data.

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Major Asian markets advanced, with the Japanese benchmark gaining 2.6 per cent on the LDP election victory. Stock benchmarks in South Korea and Australia added 0.3 and 0.6 per cent respectively.

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Meanwhile, BYD raised US$1.8 billion in a stock placement as Chinese electric-car and battery makers shore up their finances for expansion to meet an expected surge in EV sales. The Shenzhen-based firm, which reported a 28 per cent drop in third-quarter earnings, sold 50 million shares at HK$276 each.

BYD’s fundraising stoked concerns if other carmakers will also follow suit and possibly dilute earnings, Pun added. Geely Auto retreated 3.5 per cent to HK$26.10.

China Evergrande gained 3.9 per cent to HK$2.41, after staving off a default last week. Even so, lingering concerns about a liquidity squeeze in the mainland property industry has depressed stocks in the sector. China Vanke slipped 2.1 per cent to HK$17.84 and Country Garden lost 1.1 per cent to HK$7.23.

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