Hong Kong stocks slide to 4-week low as Alibaba, Tencent, HSBC pace losses while investors fret over valuations, recovery outlook

Hong Kong stocks fell to the lowest level in four weeks, led by tech leaders including Alibaba Group Holding, as some investors cautioned valuations may have risen well ahead of earnings and economic recovery in mainland China.

The Hang Seng Index slumped 1.6 per cent to 19,635.85 at the noon break, a level not seen since March 28. The Tech Index sank 3.5 per cent, while the Shanghai Composite Index retreated 0.35 per cent.

Alibaba tumbled 3.3 per cent to HK$84.05 while Tencent Holdings slipped 2.2 per cent to HK$337.40. HSBC dropped 0.5 per cent to HK$55.70 ahead of its first-quarter earnings report next week. Developer Longfor Group lost 2.5 per cent to HK$21.55.

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Gains of 1.3 per cent to 1.9 per cent in China Life, PetroChina and CNOOC tempered losses.

"The market simply doesn't have confidence in the current recovery," Wang Qi, CEO of MegaTust Investment in Hong Kong, said in a recent note to clients. "A recovery may already be priced in for some sectors, like airlines and duty-free shopping. The market seems to have priced in the good news, but not the potential risks."

The Hang Seng Index has risen 0.8 per cent this month in a wobbly start to the quarter, while the broader MSCI China Index slipped about 4 per cent, despite a stronger-than-expected China GDP data. Concerns about weak earnings and US tech curbs have fanned risk aversion, before the local markets pause for a holiday next week.

Analysts trimmed the 12-month forward earnings of companies in the Hang Seng China Enterprises Index by 9.5 per cent last week, according to Bank of America, on top of a 10 per cent cut in the preceding week. So far, onshore companies that missed 2022 earnings targets have outnumbered those that exceeded by almost three to one, it added.

Smartphone maker Xiaomi fell 3.3 per cent to HK$11.00, after a high court in India rejected its bid to recover US$676 million of assets seized by the government. Meanwhile, NetEase weakened 3.8 per cent to HK$138.30 after the 21st Century Business Herald said the game developer was suing Blizzard for 300 million yuan (US$44 million).

One company began trading today. Rongcheer Industrial Technology slumped 20.9 per cent to 56.87 yuan in Shenzhen.

Elsewhere, Asian markets were mixed. The Nikkei 225 in Japan added 0.3 per cent while the Kospi in South Korea dropped 1.8 per cent and the S&P/ASX 200 in Australia fell 0.1 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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