Hong Kong stocks extend sell-off as global funds retreat on earnings concerns, Fed sends hawkish message

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Uploaded: 2023-10-20T02:32:15.000Z
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Global funds took another US$3.3 billion off the table this week from the A-share market, a record pace of pullback over the past 10 weeks

Treasuries slumped overnight after Fed Chair Powell issued a hawkish message, saying its rate policy was still not too tight

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A screen showing the Hang Seng stock index outside Exchange Square, in Hong Kong in August 2023. Photo: Reuters

Jiaxing Li

Published: 10:32am, 20 Oct 2023Updated: 4:39pm, 20 Oct 2023

Hong Kong stocks suffered the biggest weekly loss in two months as global funds trimmed their bets on Chinese stocks amid concerns the corporate earnings season will disappoint. Investors also braced for more losses after the Federal Reserve said its policy was still not too tight.

The Hang Seng fell for a third day, losing 0.7 per cent to 17,172.13 on Friday, taking the decline in the week to 3.6 per cent. The Tech Index lost 1 per cent while the Shanghai Composite Index dropped 0.7 per cent to trade near an 11-month low.

Alibaba Group dropped 0.8 per cent to HK$78.50 while rival e-commerce platform operator JD.com eased 0.6 per cent to HK$96.65. Tencent weakened 0.8 per cent to HK$289, Baidu declined 3.2 per cent to HK$104.30 and Meituan retreated 2.4 per cent to HK$107.80.

CATL, the world’s biggest maker of EV batteries, said third-quarter earnings rose 10.7 per cent in the slowest gain since the start of 2022. China Telecom lost 1.6 per cent to HK$3.71 before its earnings results. Bourse operator Hong Kong Exchanges and Clearing erased a 0.9 per cent drop, as investment income masked a weak core business as IPOs dwindled amid weak transaction volume.

A rebound in China equities will be “much longer delayed than we expected,” said Patrick Pan, strategist at Daiwa. China’s property debt woes, rising geopolitical risks and soaring US government bond yields have dominated markets, with investors ignoring better-than-expected economic data, he said.

Foreign investors sold 24 billion yuan (US$3.3 billion) worth of mainland-listed stocks via Stock Connect this week, bringing the net selling to over 160 billion yuan in the past 10 weeks, the most on record, according to data compiled by Daiwa.

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Protesters on both sides of Israel-Hamas conflict flood streets around the world

They have surrendered half of their purchases since China’s reopening in late 2022, Daiwa said. In Hong Kong, foreign ownership of H shares has declined to 37.1 per cent by September from 44 per cent in early 2020, it estimated.

Elsewhere, US Treasury yields surged overnight, with 10-year notes fetching a 16-year high of about 5 per cent. Fed Chair Jerome Powell said policymakers would be careful in raising interest rates and suggested its current policy was still not too tight. An escalation in Middle East tensions also sapped risk appetite.