Hong Kong stocks drop to 6-month low as Lenovo, Xpeng earnings take a hit from China’s weak recovery, US debt ceiling talks sap sentiment

The PC maker’s revenue slipped 17 per cent in the first quarter, while Tesla challenger Xpeng saw its revenue nearly halve

US lawmakers are still locked in their negotiations over raising the debt ceiling with only days to go before an unprecedented default could occur

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The Hang Seng Index was heading towards a third weekly loss on Thursday. Photo: EPA-EFE

Published: 10:57am, 25 May 2023Updated: 4:46pm, 25 May 2023

Hong Kong stocks dropped to a six-month low as Lenovo and Xpeng reported disappointing earnings amid China’s weak economic recovery. A stalemate in debt ceiling talks in the US continued to sap sentiment.

The Hang Seng Index slid 1.9 per cent to 18,746.92 at Thursday’s close, breaching the 19,000-mark for the first time since December. The Tech Index dropped 2.3 per cent while the Shanghai Composite Index declined 0.1 per cent.

Alibaba and Tencent both dropped 3 per cent to HK$78.65 and HK$323.40, respectively. Food delivery giant Meituan shed 3.4 per cent to HK$126 while CSPC Pharmaceutical weakened 3 per cent to HK$7.23 before reporting their results later today. Property developer Longfor Group slipped 2.6 per cent to HK$15.72, while Country Garden, one of its peers, tumbled 1.3 per cent to HK$1.49.

Lenovo, the world’s largest PC maker, reported that its revenue dropped 17 per cent during the March quarter and announced a 5 per cent cut of its workforce to cut costs. Smartphone maker Xiaomi’s revenue fell 19 per cent in the first quarter, hit by weak consumption in China and sluggish global demand.

Similarly, Tesla challenger Xpeng saw its revenue nearly halve as an aggressive price war between electric-car makers narrowed margins.

“China’s recovery is losing steam,” said Arthur Budaghyan, chief emerging markets strategist at BCA Research, in a webinar on Wednesday. Consumer spending growth has lagged expectations, while the property sector is not about to turn a corner any time soon, he said.