Alibaba, HSBC pressure Hong Kong stocks before Fed decision while Country Garden sinks on stock placement

Name: China orders Covid lockdowns and mass testing as nationwide case numbers surpass 1,000
Uploaded: 2022-07-27T02:33:28.000Z
Duration: 2 min 50 s
Description: China orders Covid lockdowns and mass testing as nationwide case numbers surpass 1,000

Alibaba Group surrendered the bulk of Tuesday’s gain while HSBC weakened, with both due to report earnings next week; Country Garden sank on stock sale plan

Hang Seng Index members to post a 32 per cent drop in second-quarter earnings, after a 41 per cent decline in the preceding three months: Bloomberg data

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Local stocks face another test as the Fed prepares to raise its key interest rate. Photo: EPA-EFE

Cheryl Heng

Published: 10:33am, 27 Jul 2022Updated: 4:57pm, 27 Jul 2022

Hong Kong stocks fell as Alibaba Group Holding surrendered most of Tuesday’s rally and traders focused on potential weakness in corporate earnings and tighter US rate policy. Country Garden sank following a share placement plan.

The Hang Seng Index retreated 1.3 per cent to 20,670.04 at the close of Wednesday trading, the most in a week. The benchmark has declined 5.4 per cent in July, set for the worst month since November. The Tech Index lost 1.3 per cent, while the Shanghai Composite Index was little changed.

Traders were wary of surprises as the Federal Reserve concludes its policy meeting later today with a likely 75-basis point hike in its key rate. The European Central Bank last week made a bigger-than-expected half-point hike to fight inflation. Aggressive policy tightening by major central banks have raised recession fears, with the IMF downgrading its growth projections yet again this week.

Alibaba, the owner of this newspaper, slipped 3.3 per cent to HK$101, losing a big chunk of Tuesday’s 4.8 per cent advance on the back of its bid for a primary listing status in Hong Kong. HSBC fell 0.4 per cent to HK$49.90 while China Merchants Bank declined 1.1 per cent to HK$43.95.

Alibaba is due to report its fiscal June quarter results next week, a period when Covid-19 lockdowns in various mainland cities dented consumer confidence. HSBC and Standard Chartered are expected to post weaker results as China’s slowdown weighed on demand for credit.

“Don’t expect too much [from Alibaba’s earnings]. There have been so many lockdowns that really hurt the economy,” said Francis Lun, chief executive of Geo Securities. “I doubt there will be a gradual recovery [in earnings], given the way the economy is managed, I am not optimistic at all.”

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China orders Covid lockdowns and mass testing as nationwide case numbers surpass 1,000

Goldman Sachs last week trimmed its year-end target for MSCI China Index, after cutting the earnings growth projection to zero from 4 per cent. Members of the Hang Seng Index are expected to post a 32 per cent drop in the second quarter, compared to the first quarter’s 41 per cent decrease, according to Bloomberg data.