Hong Kong stocks suffer another sell-off as Alibaba drags Chinese tech lower while Omicron, Evergrande stoke risk aversion

Alibaba slid amid a management reshuffle as Chinese tech benchmarks in the US and Hong Kong have lost US$124 billion of value since Didi’s US delisting move
The Omicron variant spread in the region while Evergrande plunged 20 per cent as its failure to meet a US$260 million debt guarantee stoked risk aversion

China stock market

Cheryl Heng

Published: 10:26am, 6 Dec 2021

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Hong Kong stocks fell to more than 14-month low as Alibaba Group Holding slumped amid a management reshuffle. The spread of Omicron variant and concerns about growing default risk among Chinese developers also shook market confidence.

The Hang Seng Index retreated 1.8 per cent to 23,349.38 at the close of Monday trading, the lowest level since September last year. The Tech Index sank 3.3 per cent, the most in a week, while China’s Shanghai Composite Index declined 0.5 per cent.

Alibaba lost 5.6 per cent to trade at an all-time low of HK$112.70. The e-commerce group, the owner of this newspaper, said Xu Hong will replace Maggie Wu Wei as chief financial officer from April next year, according to an exchange filing. The stock has lost 28 per cent since November 18 when it reported a weak quarterly earnings, and 47 per cent over the past six months.

“Risks are everywhere as we get close to the end of the year,” Natixis analysts Emilie Tetard and Florent Pochon wrote in a December 3 report to clients. “The Covid-19 resurgence will make things uncertain again and US-China tensions are increasing on the regulatory front with the US delisting of Chinese tech giants.”

Since Didi Global’s decision on Friday to shift its listing to Hong Kong from New York, Chinese tech stocks on the Hang Seng Index and the Nasdaq Golden Dragon China Index have lost US$124 billion in market value, according to Bloomberg data.

Regulatory scrutiny on big tech names has soured sentiment, while increasing competition posed further headwinds, said Shawn Yang Zixiao, deputy research head and a managing director at Blue Lotus Capital Group in Hong Kong. “As for Alibaba’s management reshuffle, it could be seen as a move to better integrate their resources and focus more on overseas markets.”

Other Chinese tech giants also saw big losses as Didi’s decision weakened sentiment and caused uncertainty. Tencent Holdings tumbled 3.2 per cent. NetEase and JD.com sank more than 4.7 per cent, with both joining the Hang Seng Index family from Monday. Two other entrants, China Resources Beer and ENN Energy, lost 2.3 per cent and 6.5 per cent respectively,

China’s securities watchdog tried to calm markets after the Didi’s announcement. It said on Sunday that media reports suggesting Chinese regulators are pushing for so-called variable interest entities to cancel their US listings are a “complete misreading and misinterpretation” of the regulations.

06:14

Why is the Omicron variant so concerning? Virologist warns Covid strain could ‘wreak havoc’ in HK

Losses over the past two weeks have driven the price-to-book value of Hang Seng Index members below one time for six straight days through Friday, the longest stretch in 2021. The cheapening valuation, however, has brought no joy for mainland Chinese money managers, with nine of 39 funds in the red this year.

Elsewhere, Hong Kong confirmed its fourth Omicron case over the weekend as the Covid-19 variant spread across the region, prompting several countries to tighten border controls to contain the pandemic.

China Evergrande stoked risk aversion yet again as the Guangdong provincial government stepped in to oversee its debt restructuring efforts. The move came as China Aoyuan and repeat offender Sunshine 100 missed another bond repayment. Kaisa Group faces a US$400 million bond due on December 7.

Evergrande, carrying more than US$300 billion of liabilities, plunged 20 per cent to an 11-year low of HK$1.81. It failed to meet demands on a US$260 million guarantee, prompting financial regulators to try to calm nerves in the market.

Major markets in Asia retreated. Equities in Japan 0.4 per cent while stocks in South Korea rose 0.2 per cent. The Australian benchmark remain little changed.

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