Hong Kong stocks enter bear market as sell-off in Alibaba, Tencent, developers deepens amid rate-hike worries

Property developers retreated as rising mortgage costs erode local homebuyers’ purchasing power, while losses in Alibaba and Tencent deepened
The Hang Seng Index has dropped 20 per cent from the recent peak on June 28, while the sell-off has erased US$1.3 trillion in value from the city’s stock market this year

Hong Kong stock market

Jiaxing Li

Published: 10:37am, 23 Sep, 2022

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Hong Kong stocks weakened for a third day as the benchmark index hit the lowest level in almost 11 years amid concerns further increases in borrowing costs will weaken the economy. The benchmark slipped into bear territory as losses in tech companies and developers deepened.

The Hang Seng Index lost 1.2 per cent to 17,933.27 at the close of Friday trading, the lowest since November 2011 and taking the decline this week to about 4.4 per cent. The benchmark has now lost 20 per cent from the peak on June 28, a bear-market definition. The Tech Index tumbled 2.3 per cent, while the Shanghai Composite Index dropped 0.7 per cent.

Alibaba Group retreated 3 per cent to a March low of HK$78.40, while Tencent Holdings fell 2.8 per cent to HK$275. Pork processor WH Group slipped 4 per cent to HK$5.25, while casino operator Sands China slumped 4 per cent to HK$17.64. Rate-sensitive property stocks also took a beating, with New World losing 1 per cent to HK$25 and Sun Hung Kai Properties falling 0.6 per cent to HK$93.05.

“Hong Kong is very likely to raise interest rates again later this year in lockstep with the US, which would further drag down the purchasing power of local home buyers,” said Dickie Wong, executive director of research at Kingston Securities.

Alibaba’s stock price in Hong Kong has plunged 9.7 per cent this week, while Tencent lost 6.2 per cent. Sun Hung Kai Properties has dropped 2.5 per cent. EV makers also slumped, with Xpeng and Nio losing 14.6 to 15.4 per cent this week.

The Hong Kong Monetary Authority lifted its base rate for a fifth time, to a 14-year high of 3.5 per cent, on Thursday, and warned of possibly more as the Federal Reserve pledged to “keep at it” to contain inflation. HSBC and peers raised their prime rates for the first time since 2018, ratcheting up mortgage financing costs.

The Hang Seng Index has dropped 10 per cent this month, bringing the losses this year to 23.3 per cent. Almost US$1.3 trillion of value has been wiped out from the city’s stock market this year on a combination of tech crackdown, Covid-19 curbs and fund exodus.

Two stocks debuted on Friday. Electronics maker Bangyan Technology dropped 11.8 per cent to 25.58 yuan in Shanghai. Henan Cocyber Information and Technology, which operates a big-data platform, surged 45 per cent to 10.18 yuan in Beijing.

Elsewhere in Asia, stocks in Australia lost 1.9 per cent and those in South Korea lost 1.8 per cent. The Nikkei 225 in Japan slipped 0.6 per cent.