Alibaba, Tencent, Meituan slam tech stocks to 3-week low as regulatory risks cloud earnings outlook while developers weaken on Covid fallout

Concerns about tightening regulation and corporate earnings kept investors at bay after the latest bout involving Meituan and delivery platform operators

Developers slid after offering their properties as isolation centres to help the Hong Kong government fight the Covid-19 crisis

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A man wearing a mask walks by an electronic board showing the Shanghai and Shenzhen stock indexes in Shanghai on February 3. Photo: Reuters

Published: 10:50am, 21 Feb 2022Updated: 4:46pm, 21 Feb 2022

Hong Kong stocks fell to a two-week low amid concerns new regulations will hurt the outlook for corporate earnings of Chinese tech stocks, while traders cut risky bets before earnings reports from the likes of HSBC and Alibaba Group Holding this week.

The Hang Seng Index retreated 0.7 per cent to 24,170.07 at the end of Monday trading. The Tech Index declined 2.8 per cent to a three-week low, while the CSI300 lost 0.4 per cent. Alibaba tumbled 3.9 per cent while Tencent slipped 5.2 per cent. Bourse operator Hong Kong Exchanges & Clearing lost 0.8 per cent.

Meituan plunged 15 per cent on Friday after China ordered food-delivery platform operators to slash fees to help businesses amid the Covid-19 crisis, renewing fears of tightening regulation and state intervention. The stock retreated 4 per cent today, surrendering an earlier 3.2 per cent rebound.

“Major brokerage firms will continue to downgrade earnings forecasts and cut price targets for particularly tech stocks, which will weigh on the Hang Seng Index,” said Castor Pang, head of research at Core Pacific-Yamaichi. Investors have continued to sell tech stocks, he added.

Risks on financial markets, social sector, antitrust and data security remain elevated, according to gauges tracked by Goldman Sachs.

HSBC, Alibaba, NetEase and HKEX are among big companies issuing their earnings reports this week. Analysts have trimmed earnings for Hang Seng blue-chip companies as much as 15 per cent over the past eight months, according to Bloomberg data.

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