Hong Kong stocks retreat as Ping An, Sinopec, tech firms expose weak earnings season amid China slowdown

·3-min read

Hong Kong’s benchmark stock index tumbled on concerns about corporate earnings strength amid a slowdown in the Chinese economy, as Ping An Insurance and Sinopec pointed to a poor outlook for the earnings season. Li Ning slumped on a stock sale plan.

The Hang Seng Index fell by 0.3 per cent to 25,555.73 at the close of Thursday trading, failing to hold on to earlier gains. The Hang Seng Tech Index was little changed following a 3.2 per cent sell-off on Wednesday.

Ping An slumped 2.4 per cent to HK$58.35 after reporting a 31 per cent slide in earnings last quarter as investment performance sagged. Bourse operator Hong Kong Exchanges & Clearing, which posted a 3 per cent drop in earnings, retreated 1.5 per cent to HK$467.60.

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Stocks wobbled with investors unimpressed by the third-quarter report cards as more companies prepared to issue their earnings. Weak results so far have exceeded the 2.4 per cent average earnings drop predicted for the 60-member Hang Seng Index in a Bloomberg consensus. China’s economic growth slowed to 4.9 per cent last quarter as the property and manufacturing engines faltered.

China Petroleum & Chemical Corporation, or Sinopec, fell 0.3 per cent in Hong Kong and 3.5 per cent in Shanghai. China’s largest oil refiner said its interim pre-tax profit fell by a third to 721 million yuan (HK$876 million).

“The poor performance of quarterly results [including] the HKEX and Ping An Insurance’s earnings did not impress the market,” said Will Shum, portfolio management director in Hong Kong at iFast Financial. “Investors await for Chinese banks’ results for further proof” that the fundamentals are sound], he added.

Li Ning Co, the eponymous maker of athletic wear founded by China’s best-known Olympic gymnast, plunged 8.2 per cent to HK$87.40, the most in three months. It unveiled a plan to raise HK$10.4 billion (US$1.35 billion) by placing out 120 million new shares.

Li Ning, the former Olympic gymnast and founder of his namesake athletic wear company, during the 2016 interim results press conference in Wan Chai in August 2016. Photo: Sam Tsang.
Li Ning, the former Olympic gymnast and founder of his namesake athletic wear company, during the 2016 interim results press conference in Wan Chai in August 2016. Photo: Sam Tsang.

Gains in tech stock index evaporated following the biggest sell-off in seven weeks on Wednesday, as the earnings outlook darkened. However, selected key movers helped temper the losses. Meituan, China’s dominant food delivery and restaurant review platform, added 1.3 per cent, paring a 3.2 per cent advance.

Alibaba Group Holding and Tencent Holdings, the world’s largest games publisher by sales, also pared gains. Tech sold off earlier this week after Alibaba Health Information said it likely swung to a loss in the first half to September 30.

Mainland developers continue to spook investors because of worries about their debt load. Kaisa Group sank 18 per cent after suffering credit downgrades from S&P and Fitch Ratings on Wednesday. China Evergrande, the world’s most indebted developer, lost 5.1 per cent.

In mainland China markets, the benchmark indices in Shanghai and Shenzhen fell by more than 1 per cent amid lingering concerns about the industry and the broader economic slowdown. This also inflicted losses on two market debutants.

Liaoning Chengda Biotechnology, which develops and manufactures vaccines, fell 27 per cent to 80 yuan on Shanghai’s Star Market, compared with its initial public offering (IPO) price of 110 yuan.

Rumere, an apparel manufacturer and distributor, fell 13.2 per cent to 29.79 yuan in Shenzhen, compared with its IPO price of 33.16 yuan.

Major markets in Asia were mostly in the red. Benchmark indexes in Japan declined by 1 percent, while South Korean and Australian equities retreated at least 0.3 per cent.

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