Hong Kong, China stock markets drop as April economic data throws up a mixed picture of post-coronavirus recovery
- China’s April industrial output beat expectations, while retail sales trailed economists’ projections
- AIA Group and Melco International Development post poor results
Hong Kong and Chinese stocks fell on Friday, with benchmark indexes closing the week lower as China’s April economic data provided a mixed picture of how the world’s second-largest economy is recovering from the fallout of the coronavirus pandemic.
Equities fluctuated between gains and losses throughout most of the day, as traders looked to the data for clues as to whether the post-pandemic recovery in China has been gathering pace. While general readings showed a continuing improvement in economic activity last month, a breakdown of the data pointed to a mixed bag. Industrial production exceeded analysts’ expectations while retail sales trailed projections.
Hong Kong’s Hang Seng Index fell 0.1 per cent to 23,797.47, capping a weekly loss of 1.8 per cent. The Shanghai Composite Index slipped 0.1 per cent to 2,868.46, bringing the week’s loss to 0.9 per cent. Both benchmarks changed directions at least five times on Friday.
Declines in both Hong Kong and China stood in contrast to gains elsewhere in Asia, with the stock benchmarks gaining in Tokyo, Seoul, Taipei, Singapore and Kuala Lumpur.
Melco International Development led declines in Hong Kong after the casino operator swung to a net loss in the first quarter, while Gigadevice Semiconductor rose in Shanghai on optimism about more policy support for China’s home-grown technology companies.
“China’s industrial production data came in better than forecast but consumers are expected to carry the bulk of the heavy lifting during the initial phase of the post-lockdown recovery,” said Stephen Innes, chief global markets strategist at AxiCorp. “Consumer spending beyond China needs to pick up to full tilt. Otherwise, the nascent recovery in industrial output will also start tapering off. The miss on retail sales is providing poor optics, suggesting consumption is falling well short of what was expected to be a pent-up demand rebound.”
Industrial production increased 3.9 per cent from a year earlier in April, while retail sales dropped 7.5 per cent, the statistics bureau said on Friday morning. That compared with estimates of 1.5 per cent growth and a decline of 6 per cent respectively in a Bloomberg poll.
Tencent Holdings, China’s biggest games publisher and the heaviest stock on the Hang Seng Index, fell 2.2 per cent to HK$421.20, reversing gains a day earlier on stronger-than-expected quarterly profit.
On the plus side, investors piled into AAC Technologies Holdings, driving up the stock by 6.5 per cent to HK$42.65. The smartphone acoustic components maker that supplies Apple and Huawei Technologies gained even after its first-quarter earnings had slumped 88 per cent from a year earlier to 52.7 million yuan (US$7.4 million) as the pandemic crippled production and shipments volumes.
Insurer AIA Group rose 1.6 per cent to HK$68.25 despite its quarterly new business value dropping 27 per cent to US$841 million – the first time since it listed in Hong Kong in 2010 – as the Covid-19 pandemic hammered performance in its Asia markets.
New listings advanced in their stock market debuts. Property management services provider Central China New Life jumped by 22 per cent to HK$8.37 when its shares began trading in Hong Kong for the first time. Chinese medical devices provider Peijia Medical soared by 68 per cent to HK$25.80 after its initial public offering (IPO) was overbought by a staggering 1,184 times. Peijia, based in Suzhou city of Jiangsu province, raised HK$2.34 billion in its IPO.
The impressive performances underlined improved sentiment for IPO shares, after funds raised by the Hong Kong bourse dropped by about a third in the first quarter as the Shanghai Stock Exchange overtook the city as the world’s top IPO destination.
“The current economic crisis meant that investors value companies with strong cash flow,” said Kenny Tang, chief executive at Royston Securities.
With additional reporting by Zhang Shidong in Shanghai.
