Hong Kong stocks slip as Citigroup trims Alibaba price target while China lockdown, Fed tightening fuel recession risks

Stocks have struggled for momentum after losing 6.4 per cent last quarter on a plethora of hurdles; Citigroup trimmed its price target for Alibaba

Goldman Sachs expects more rate cuts as China vows to provide support for the real economy amid Covid-19 lockdown in Shanghai

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A public screen displays the Shenzhen and Hang Seng stock Indexes on February 7. Photo: Bloomberg

Published: 10:38am, 7 Apr 2022Updated: 4:37pm, 7 Apr 2022

Hong Kong stocks fell from a five-week high as Chinese tech companies led losses. Appetite waned as rising cases of Omicron in China and policy tightening in the US heightened recession risks.

The Hang Seng Index retreated 1.2 per cent to 21,808.98 at the close of Thursday trading, after earlier gaining as much as 0.7 per cent. The Tech Index lost 2.5 per cent and the Shanghai Composite Index fell 1.4 per cent.

Alibaba Group Holding slipped 2.2 per cent after Citigroup lowered its target of US-listed stock, while maintaining a buy call. JD.com slumped 3.2 per cent after billionaire founder Richard Liu stepped down as CEO. WuXi Biologics sank 5.3 per cent to HK$65 while Budweiser slipped 3.8 per cent to HK$19.60. Haidilao weakened 7.2 per cent as travel curbs hit consumption and leisure spending.

Shanghai remained in a citywide lockdown after it reported record-high cases for the sixth straight day, adding nearly 20,000 infections. The tally has reached 114,000 since the latest wave of outbreaks started on March 1, raking up more cases in a month than the previous two years combined.

Citigroup cut its price target on Alibaba’s US-listed stock to US$177 from US$200 on Wednesday, citing headwinds to earnings from Covid-19 impact. The stock last traded at US$105.24. The US bank has trimmed its target at least eight times over the past year from as high as US$338, according to Bloomberg data.

Elsewhere, US policymakers agreed on about US$95 billion monthly caps as Fed officials warned about its “rapid” balance-sheet reduction plan, according to minutes of its March policy meeting published on Wednesday. Deutsche Bank predicts the US economy could tip into recession in 2023.

“The fundamental outlook for [US] stocks has deteriorated since the end of last year,” Mike Wilson, Morgan Stanley’s chief investment officer said in a podcast this week. “While markets have reflected some of this deterioration, we think it remains vulnerable to disappointing growth and increased risk of a recession next year.”

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