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

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A screen showing various index figures in the Connect Hall in Hong Kong in May 2023. Photo: Bloomberg

Published: 10:50am, 1 Aug 2023Updated: 4:58pm, 1 Aug 2023

Hong Kong stocks erased gains, retreating from near a three-month high on concerns recent spikes in tech heavyweights were excessive and not backed by fundamentals. A private report showed manufacturing in China shrank in July. HSBC jumped after earnings beat market consensus.

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.

Country Garden slumped 6.3 per cent to HK$1.48 after the developer said had no plan to pursue a share placement, while a Bloomberg report said major owner Yang Huiyan transferred over half of her stake in a property management firm to a family charity. Longfor Group slid 5.3 per cent to HK$19.64.

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.