Hong Kong stocks suffer from overheated bull run as JD.com, Xpeng tumble while HSBC gains on earnings beat
- The two-month surge in tech stocks has driven the Tech Index into an overheated zone, signalling a market reversal is not far away
- HSBC gained after the UK lender’s second-quarter earnings beat market expectations
The Hang Seng Index slipped 0.3 per cent to 20,011.12 at the close of Tuesday trading, after gaining as much as 1.3 per cent. The Tech Index lost 0.3 per cent, while the Shanghai Composite Index was little changed.
JD.com dropped 1 per cent to HK$158.20, Tencent lost 0.1 per cent to HK$354 and Meituan declined 0.5 per cent to HK$145.50. EV maker Xpeng tumbled 4.7 per cent to HK$82.70 while BYD lost 0.3 per cent to HK$274.80.
The 14-day relative-strength index on the Hang Seng Tech Index climbed to near 70, suggesting the 25 per cent bull-market rally from late May was about overdone and poised to reverse. The readings on stocks of Tesla’s three main Chinese rivals Xpeng, Nio, and Li Auto breached the 70-point threshold.
Stocks weakened as the Caixin/S&P Global China manufacturing index fell to 49.2 in July from 50.5 in June. A government report earlier this week showed Chinese manufacturing stabilised below 50 last month. A reading below 50 indicates contraction in activity.
“Today’s data underscores that China’s recovery is still weak, renewing the market’s concern on China’s economic outlook,” Kenny Ng Lai-yin, strategist at Everbright Securities. “The rally in recent weeks might have become an opportunity for some investors to sell.”
Stocks had rallied more than 5 per cent in June and July, as China assuaged investors who complained about the lack of stimulus to restore growth momentum. Foreign investors were net buyers of US$6.6 billion worth of mainland stocks last month, while mainland Chinese funds bought US$2 billion of those listed in Hong Kong, Stock Connect data showed.
Two stocks debuted on Tuesday. Harbin Fuerjia Technology jumped 29 per cent to 70.70 yuan in Shenzhen, while Zhejiang Rongtai Electric Material surged 131 per cent to 35.37 yuan in Shanghai.
Most major Asian markets traded higher. Japan’s Nikkei 225 gained 0.9 per cent, Australia’s S&P/ASX 200 added 0.5 per cent. South Korea’s Kospi also jumped 1.3 per cent.