Hong Kong stocks erase losses with HSBC's bullish earnings, Macau casino winners as manufacturing slump worries China bulls

Hong Kong stocks erased losses after HSBC surged on the back of a stellar set of earnings. The broader market struggled after a surprise slump in manufacturing in mainland China reignited concerns about an uneven post-pandemic recovery.

The Hang Seng Index gained 0.5 per cent to 20,000 at 3.16pm local time, after falling as much as 0.7 per cent. The benchmark index fell 2.5 per cent in April. The Tech Index was also little changed, following a 9.4 per cent loss last month. Markets in mainland China are closed through Wednesday for the May Day holiday.

HSBC jumped 3.2 per cent to HK$57.95 for the biggest gain in more than two months. Alibaba Group gained 0.5 per cent to HK$82.45 and Tencent increased 0.8 per cent to HK$347. Carmaker Xpeng jumped 3.3 per cent to HK$38.85. Developer Country Garden slumped 2 per cent to HK$1.97, while peer Longfor Group slid 1.2 per cen1.t to HK$21.10.

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HSBC, the city's biggest commercial bank, made a pre-tax profit of US$12.9 billion, versus US$3.9 billion a year earlier, with gains in all geographies of operations. The lender proposed to pay a dividend, resuming payout on quarterly basis for the first time since 2019.

Sand China jumped 2.2 per cent to HK$28.45 and Galaxy Entertainment advanced 2.7 per cent to HK$57. Gaming revenue in Macau surged 450 per cent last month to a three-year high of 14.7 billion patacas (US$1.8 billion), fanning gains in the two leading casino concessionaires.

"The China reopening theme has not fully played out," Jack Lee, who manages China A-shares funds at Schroders, said in a report. The fast-paced reopening "will provide substantial support to the recovery in consumer spending, which in turn will support domestic earnings in many sectors."

Meanwhile, stocks earlier wavered. Manufacturing in the mainland shrank in April, after an official index fell to 49.2 in April from 51.9 in March, the statistics office in Beijing said. Sub-gauges on new orders and export orders also shrank. The weak data overshadowed optimism about a rebound in consumption, including a surge in Macau gaming revenue in April.

The PMI reading was "significantly lower than consensus and our own expectations," indicating "sluggish end-demand," Goldman Sachs said in a report. While May Day data showed improved mobility, the key questions are whether they would translate into robust consumer spending, they added.

BYD slipped 1.4 per cent to HK$232.60, as concerns about Berkshire Hathaway's sell-down clouded its otherwise solid business outlook. China's biggest EV maker almost doubled its deliveries in April to 210,295 units from a year earlier, according to a stock exchange filing on Tuesday.

The market is also watching out for the impact of another round of policy tightening in the US. The Federal Reserve is likely to raise its key rate by 25 basis points to a range of 5 per cent to 5.25 per cent later this week, according to fed fund futures.

Major Asian markets were mixed. The Kospi in South Korea rose 0.9 per cent and the Nikkei 225 in Japan added 0.1 per cent, while the S&P/ASX 200 in Australia lost 0.9 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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