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A bull sculpture is displayed outside Exchange Square, home of the Hong Kong Stock Exchange, on January 8, 2021. Photo: SCMP / Dickson Lee

Hong Kong stocks see sharpest drop in a month amid Shanghai, Macau Covid-19 flare-ups, fines on Alibaba, Tencent, Bilibili

  • With key economic data due this week, new Covid-19 cases in Shanghai and Macau stoked fears that new restrictions could dampen growth
  • Tech giants slipped after China’s antitrust watchdog fined Alibaba, Tencent and Bilibili for failing to comply with anti-monopoly rules
Hong Kong stocks fell by the most in a month after Shanghai and Macau saw flare-ups in coronavirus cases, reigniting worries of restrictions weighing down growth. Casino stocks fell sharply, while Chinese tech stalwarts sank on penalties imposed by regulators.

The Hang Seng Index retreated 2.8 per cent to 21,124.20 at the close of Monday trading, its biggest drop since June 13, adding to last week’s 0.6 per cent decline. The Tech Index fell 3.9 per cent, while the Shanghai Composite Index lost 1.3 per cent.

Galaxy Entertainment lost 4.9 per cent to HK$45.30 and Sands China fell 8.2 per cent to HK$17.14. Tencent Holdings sank 2.9 per cent to HK$342.40 while JD.com tumbled 4.4 per cent to HK$235. Alibaba Group Holding, the owner of this newspaper, weakened 5.8 per cent to HK$114.

Shanghai reported its first Covid-19 cases from a new Omicron subvariant, health officials said on Sunday, triggering new rounds of mass testing and targeted lockdowns.

“China is still a long way from a genuine recovery,” said Sean Darby, global equity strategist at Jefferies, in a note published on Monday. “In contrast to the rest of the world, the Chinese consumer is not rebelling against the high cost of living but the inconvenience of the social restrictions and testing when Covid infections burst.”

Casino stocks plunged on Monday as Macau ordered a week-long suspension of almost all business activity to curb an outbreak of the highly-infectious Omicron BA.5 subvariant. It marks the first time in two years that casinos in the city have ground to a halt, and increases uncertainty as it follows the gaming hub’s move to tighten casino licenses.

Wynn Macau retreated 6.7 per cent to HK$4.89, while SJM Holdings, which owns The Grand Lisboa, shed 6.7 per cent to HK$3.23.

The shutdown means “we would probably need to write-off July and likely August,” JPMorgan Chase analysts, who previously estimated that most casinos could survive between nine months to two years in a worst-case scenario of no revenue, were quoted as saying in a Bloomberg report.

“In the ‘new normal’, the recovery of the Macau gaming industry will be choppy, and so will the gaming stocks,” said Wang Qi, head of Hong Kong-based MegaTrust Investment, referring to consumer caution about spending.

“Consumption including gaming and tourism faces a major uphill battle,” he added.

Tencent, Alibaba and Didi fined for old unreported merger deals

Separately, China’s antitrust watchdog fined Chinese tech giants including Alibaba, Tencent and Bilibili for failing to comply with anti-monopoly rules on the disclosure of past transactions, according to a statement on Sunday. More than a third of the penalties were imposed on Tencent, out of a total of 28 deals cited.

Investors will be scrutinising a slew of key economic data to be released this week. Reports on trade figures, gross domestic product and retail sales, could reveal the extent of economic recovery and decide the pace of policy stimulus for the rest of the year.

China’s second-quarter growth is tipped to be its lowest in two years, with economists predicting 1.2 per cent growth from a year ago, according to Bloomberg data. Consumer prices also hit a two-year high in June, while factory-gate inflation moderated, according to data released by the statistics bureau on Saturday.

Swap Connect will help China attract more international bond investors

Tianqi Lithium sank 9.2 per cent to 134.45 yuan in Shenzhen, just before its secondary listing in Hong Kong on Wednesday. The slump came after a prominent investor’s wife said the shares have reached peak valuations and earnings growth in a post on Weibo on Sunday.

Major Asian markets were mixed on Monday. Japanese markets rallied 1.1 per cent while South Korean and Australian stocks lost 0.4 to 1.1 per cent.

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