Hang Seng hits one-week low before Fed rate meeting while Goldman trims targets on Chinese stocks

Goldman Sachs trimmed its earnings growth for MSCI China members and index target for 2022 after earlier lowering its China GDP forecast

The Fed is seen lifting its key rate by another 75 basis points later this week, with local property owners bracing for the first increase in prime rates

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The Exchange Square Complex in Central, Hong Kong on July 13. Photo: Bloomberg

Published: 10:35am, 25 Jul 2022Updated: 4:49pm, 25 Jul 2022

Hong Kong stocks fell as Goldman Sachs lowered its targets for Chinese stocks on earnings drag, while traders lightened positions before another expected rate increase in the US this week. Gains in Chinese developers mitigated losses.

The Hang Seng Index retreated 0.2 per cent to a one-week low of 20,562.94 at the close of Monday trading. The benchmark rose 1.5 per cent last week, the best weekly gain in July. The Tech Index slumped 1.4 per cent, while the Shanghai Composite Index declined 0.6 per cent.

Alibaba Group Holding, the owner of this newspaper, retreated 2.5 per cent to HK$99.60. Meituan declined 1.8 per cent to HK$188.20 while Tencent fell 1.7 per cent to HK$326.40. Auto stocks weakened as Geely lost 2.4 per cent to HK$16.02 and BYD Co dropped 0.6 per cent to HK$283.80.

“The risk-reward profile of Chinese onshore and offshore stocks in absolute terms is not yet attractive,” BCA Research said in a report to clients last week. “Home sales relapsed in the first two weeks of July after a one-off improvement in June, corroborating that the housing market’s fundamentals remain gloomy.”

Goldman Sachs reduced its 12-month target for MSCI China Index to 81 from 84, according to its July 21 report, citing challenges from the latest cracks in the housing market and mortgage boycott against stalled projects. That still implies a 16 per cent upside from Friday’s level.