Hong Kong and mainland China stocks slumped, joining the sell-off in global markets as the ongoing coronavirus pandemic weighs on the financial results of the world’s companies from Facebook to Tesla.
The Hang Seng Index fell 2.6 per cent to 28,550.77 for a third day of declines, slipping from a 31-month high. The Shanghai Composite Index retraced 1.9 per cent to 3,505.18 while the benchmark in southern China’s technology hub Shenzhen fell 2.8 per cent to 2,352.75.
Asia-Pacific markets fell across the region as soon as trading commenced, taking their cues from the 2.6 per cent decline overnight in the S&P 500 and the Nasdaq index. European stocks fell by the most in five weeks, with the UK unveiling new rules to contain the spread of Covid-19 and Germany lowering its projection for economic growth in 2021.
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Tesla missed estimates with its quarterly earnings for the first time since July 2019, prompting investors to question whether its stock price is worth more than 1,000 times earnings. The maker of electric cars was not alone in disappointing investors. Samsung Electronics’ profit missed analysts’ estimates amid competition in smartphone and memory chips markets. Facebook warned of “significant uncertainty” in 2021 while Apple also fell amid a cautious outlook of business from executives.
“Big earnings from Apple, Facebook, and Tesla failed to erase the overall bearish sentiment that is stemming from valuation concerns,” said Edward Moya, a strategist at Oanda.
Declines were seen in 42 of the 52 constituent stocks on the Hang Seng Index, led by the 7.6 per cent drop in Techtronic Industries and the 6.9 per cent fall in Geely Automobile Holdings. Tencent Holdings fell 2.9 per cent to HK$681, drawing a wider gap from being the first Asian company to reach US$1 trillion in capitalisation.
Stock benchmark in Australia tumbled by almost 2 per cent as the biggest loser in the Asia-Pacific region, while market barometers in South Korea, Japan retreated by at least 1 per cent. The MSCI World Index tumbled 2.2 per cent on Wednesday, the most since October 28, after closing at an all-time high on January 21.
Sentiments were also dampened by the US Federal Reserve, which left borrowing costs unchanged at its policy meeting, without promising any fresh monetary stimulus to counter the economic slump caused by the raging Covid-19 pandemic.
The US economy was still a long way from full recovery and short of the inflation and job goals set by policymakers, the Fed Reserve chairman Jerome Powell said.
“Closing of speculative short positions of certain stocks may have put pressure on non-related assets and challenges in vaccine production and distribution in Europe is also raising some concerns,” said Tai Hui, a strategist at JPMorgan Asset Management in Hong Kong. “We expect some of the laggards of 2020 should rebound strongly once the global recovery accelerates and becomes more comprehensive.”
Still, January had been a good month for Hong Kong’s stock market, with the Hang Seng rising 4.9 per cent so far, putting it on track for its fourth consecutive monthly gain, amid an unprecedented rush of money into the city from mainland China.
Mainland funds and wealthy investors plough HK$10.2 billion (US$1.3 billion) into Hong Kong’s stocks via the Stock Connect on Thursday, a 27th straight day of net inflows, according to Bloomberg data.
Cathay Pacific Airways, the city’s flagship carrier, tumbled 9.7 per cent to HK$5.95 after it announced a plan to raise more funds by selling HK$6.74 billion convertible bonds to replenish its capital.