Hong Kong stocks fall to 12-week low as investors wait on tech earnings, fret over China recovery

Hong Kong stocks fell to a 12-week low as investors wait for stronger signals of economic recovery from China and more quarterly earnings report cards from tech giants.

The Hang Seng Index slipped 2.1 per cent to 19,560.57 at the close of trading on Wednesday, its lowest point since March 21. The Tech Index sank 2.2 per cent and the Shanghai Composite Index fell 0.4 per cent.

Property developer Longfor plunged 7.1 per cent to HK$18.62, while peer Country Garden dropped 5.3 per cent to HK$1.62. Drug makers Wuxi Biologics fell 4 per cent to HK$44.85 while Hansoh Pharmaceuticals lost 4.3 per cent to HK$12.76.

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Alibaba fell 0.4 per cent to HK$85.45, while Tencent gained 0.6 per cent to HK$342.80. Tencent is expected to release its report card late on Wednesday, while Alibaba's earnings report will be out on Thursday.

Recent economic data released by China has proved underwhelming, and investors are looking to tech giants' quarterly earnings this week for stronger signals of recovery.

The Hong Kong stock market is currently in a fluctuating pattern, according to Kenny Ng Lai-yin, a strategist at Everbright Securities International in Hong Kong. The Hang Seng Index is expected to move between 19,500 and 20,200 in the short term while "choosing a breakthrough direction".

"The recent economic data released showing mainland China did not perform as well as expected has put pressure on the Hong Kong stock market," said Ng. "Investors are also waiting for earnings reports from large technology stocks, which have a more critical impact on the future market trend."

Investment banks are split over the meaning of weaker-than-expected Chinese economic data for April, with Nomura, JPMorgan Chase and Barclays reducing their China annual GDP forecasts.

JPMorgan lowered its full-year GDP growth estimate to 5.9 per cent from a previous 6.4 per cent, while Barclays economists said "5.6 per cent growth for this year is now out of reach" and set a new target of 5.3 per cent.

Nomura dropped its forecast to 5.5 per cent from 5.9 per cent, citing, "rising risk of slower activity growth, rising unemployment, persistent disinflation, falling market interest rates and a weaker currency".

Elsewhere Baidu's first-quarter results, announced on Tuesday evening, beat expectations with 31 billion yuan in revenue and profit of 5.4 billion yuan. The report sent its stock up as much as 1.3 per cent before sliding 0.4 per cent to HK$123.80.

"Investors take a wait-and-see attitude right now," said Linus Yip, chief strategist at First Shanghai Securities. "China's recovery and the US Fed's next move regarding the debt ceiling are key watching points."

Investors are waiting to hear whether the US will raise its debt-ceiling - an upper limit on government borrowing - later this week. President Joe Biden and House Speaker Kevin McCarthy said they were hopeful a deal will be reached. Failure to do so would likely trigger a default and send shockwaves across global financial markets.

One company began trading in Shenzhen. Software company Fengzhushou surged 83 per cent to 43 yuan.

Asian markets were mixed. Japan's Nikkei 225 climbed 0.8 per cent and Australia's S&P/ASX 200 fell 0.5 per cent, while South Korea's Kospi rose 0.6 per cent.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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