Hong Kong stocks extend drop from an eight-week high as traders weigh earnings outlook, pandemic costs

·4-min read

Hong Kong stocks extended a decline from an eight-week high as investors gauged the strength of corporate earnings and the impact of rising global Covid-19 cases on growth outlook. Gains in Tencent Holdings and Alibaba Group Holding limited losses.

The Hang Seng Index fell 0.3 per cent to 24,708.80 at the close, on top of a 0.5 per cent setback on Tuesday. The Shanghai Composite Index rose 0.5 per cent. The yuan weakened as much as 0.2 per cent against the US dollar after the People’s Bank of China dropped a key input used to set the currency’s daily reference rate.

Ping An Insurance sank by more than 1.8 per cent in both Hong Kong and Shanghai trading after posting lower profit. Contemporary Amperex Technology, China’s biggest maker of lithium batteries for electric vehicles, slumped as much as 4.5 per cent in Shenzhen on disappointing results, before a rebound.

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Stocks also retreated in other major Asia-Pacific markets, with benchmarks from Japan to Taiwan ending the day with losses. Futures on European equities weakened after prices hit the lowest level since May on Tuesday, while S&P 500 index failed to hold onto gains despite a rally in technology stocks.

A US consumer confidence report came in worse than forecast as data showed Covid-19 hospitalisations have risen at least 10 per cent in the past week.

“The pandemic continues to be the most important factor influencing the global economy and investment landscape in the next 12 months,” said Tai Hui, a strategist at JPMorgan Asset Management in Hong Kong. The latest surge should push investors to take a “more defensive position” for the time being, he added.

With the earnings season kicking off, traders are looking to the quarterly results for clues to whether listed companies in China and Hong Kong have weathered the damage brought by the pandemic. Some 238 of the 300 biggest Chinese companies are expected to report their third-quarter results through Friday.

The 85 companies that have already released their reports produced an average 13 per cent rise in profit, according to Bloomberg data. The 300 companies posted a 13 per cent drop in the previous quarter.

Ant Group’s initial public offering is also expected to lock up more funds from the market as retail investors scramble for a piece of the Chinese fintech giant. The company will take orders from retail investors through Friday for about 41.8 million shares priced at HK$80 each.

Ping An shed 3.2 per cent to HK$82 in Hong Kong and while Shanghai-traded stock lost 1.8 per cent to 79.58 yuan. China’s biggest insurer said that net income dropped 20 per cent from a year earlier in the first nine months.

HSBC slid 3.4 per cent to HK$32.65, ending a four-day winning streak spurred by better-than-expected earnings and possible resumption of dividend payout.

HSBC eyes restarting dividend as third-quarter profit beats estimates on strength of Asian business, slower loan losses

On the flip side, WH Group surged 6.9 per cent to HK$6.67 after posting quarterly profit that exceed analysts’ projection. The management expected the company’s recovery to continue into next year and Jefferies Group said that the result was an inflection point. Net income for the first nine months dropped 13 per cent from a year earlier.

Tencent Holdings and Alibaba Group Holding, the owner of the newspaper, both rose to records, closing at HK$601 and HK$307.40 respectively.

In the mainland, Contemporary Amperex, the biggest weighting on the ChiNext index of Shenzhen-listed small-caps, added 1.3 per cent to 240.26 yuan after a wild trading session. Net income for the nine-month period dropped 3 per cent, and could be at risk of missing the full-year forecast of 13 per cent by analysts.

Frontier Biotechnologies, a biopharmaceutical firm based in Jiangsu province, completed its Star Market debut in Shanghai with at 46 per cent gain to 29.91 yuan.

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