Hong Kong stocks fall as Tencent’s gaming revenues disappoint and PBOC raises rates

Tencent accounts for almost half of the decline on the Hang Seng Index after Nomura and Citigroup said its fourth-quarter gaming revenues had missed forecasts

PUBLISHED : Thursday, 22 March, 2018, 9:18am
UPDATED : Thursday, 22 March, 2018, 5:58pm

Hong Kong ‘s stocks dropped by the most in two weeks, as Tencent Holdings’ gaming revenues trailed estimates and China’s central bank raised borrowing costs following an overnight rate increase by the Federal Reserve.

The Hang Seng Index fell 1.1 per cent, or 343.47 points, to 31,071.05 at the Thursday close, its biggest decline since March 5. The Hang Seng China Enterprises Index, known as the H-share gauge, retreated for a fifth day with a 0.8 per cent drop. The mainland’s equity benchmark also fell on concern tightening liquidity will restrain large-caps with stretched valuations.

Tencent, the biggest weighting on the city’s benchmark gauge, slumped the most in six weeks after Nomura Holdings and Citigroup said fourth-quarter gaming revenues from the Chinese technology juggernaut had surprisingly fallen short of forecasts. The stock made up almost half of the loss on the Hang Seng Index on Thursday.

“The fact that Tencent’s revenue from online games had decreased is pressuring the stock market,” said Kingston Lin King-ham, director of AMTD securities brokerage.

Tencent tumbled 5 per cent to HK$439.40, its steepest loss since February 6. Fourth-quarter sales of 66.4 billion yuan (US$10.5 billion) were 3 per cent below consensus, owing to lower-than-expected online gaming revenue, Nomura said. Citigroup lowered its share-price estimate of the stock by 1 per cent, citing the same reason.

Tencent’s full-year profit in 2017, which was released after the market closed on Wednesday, beat analysts’ projections by 0.8 per cent, according to Bloomberg data.

Other technology stocks fell alongside with Tencent. Online game developer Kingsoft sank 10 per cent to HK$26.60 and China Literature, the online-reading spin-off unit of Tencent, eased 1.6 per cent to HK$74.60.

Stocks also fell on concern a trade war between the US and China will erupt, as speculation mounted that President Donald Trump is set to announce about $50 billion of tariffs on the mainland’s products over intellectual-property violations.

Bourse operator Hong Kong Exchanges and Clearing fell 1.9 per cent to HK$264. Ping An Insurance (Group) dropped 0.7 per cent to HK$87.70 and AIA Group lost 1.1 per cent to HK$67.20. China Construction Bank eased 1.7 per cent to HK$8.27.

China Mobile retreated 0.8 per cent to HK$71.75 after the telecoms carrier said at Thursday’s noon break that net income increased 5.1 per cent to 114.3 billion yuan last year.

In the mainland, the Shanghai Composite Index slid 0.5 per cent, or 17.47 points, to 3,263.48. The CSI 300 Index of large companies lost 1 per cent and the ChiNext gauge of small-cap shares dropped 0.7 per cent

The People’s Bank of China raised its seven-day reverse repurchase rate in its regular open market operations on Thursday by five basis points in an effort to stabilise its interest rate spread with the US.

Tightening liquidity weighed on big-cap shares whose valuations were elevated after a run-up in share prices last year. Dairy make Inner Mongolia Yili Industrial Group slumped 5.7 per cent to 28.72 yuan and New China Life Insurance shed 4.7 per cent to 47.18 yuan.