Hong Kong stocks fell to the lowest level since January while mainland peers declined with investors spooked by heightened domestic regulatory risks. An escalation in sanctions war with Western nations over Xinjiang also turned markets on the defensive mood.
Baidu Inc, China’s dominant internet search engine company, flopped on its trading debut in Hong Kong with zero premium over its IPO price of HK$252. China’s top vaping devices producer Smoore slumped, following a sell-off in peer RLX Technology in the US. China signalled it will rein in the tobacco industry after clamping down on fintech players.
The Hang Seng Index retreated for a third day, losing 1.3 per cent to 28,497.38 to reach the lowest level since January 29. The Shanghai Composite fell 0.9 per cent, while the CSI 300, which tracks the biggest stocks listed in Shanghai and Shenzhen, and the tech-heavy ChiNext in Shenzhen depreciated by about 1 per cent.
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The US, EU, UK and Canada banded together to sanction Chinese officials over alleged human rights abuses in Xinjiang on Monday, sending a clear sign that the Biden administration plans to wield its alliances as a powerful tool to counter an increasingly assertive China. China retaliated in kind.
“Rising geopolitical tensions have had some psychological impact on the markets,” said Kenny Tang Sing-hing, co-founder and chief executive of Royston Securities in Hong Kong. Beijing’s potential tightening of regulations around the e-cigarette makers have also had a “significant impact” on investor sentiment, he added.
In Hong Kong, some 48 of the 55 benchmark constituents of the Hang Seng Index fell. The Hang Seng Tech Index slid 2.5 per cent, bringing the slump to 24.2 per cent from its peak on February 17.
Geely Automobile led blue chips lower, falling 6.6 per cent to HK$22.55. The company reported its net profit fell 32 per cent to 5.5 billion yuan in 2020. Meituan dropped 5.2 per cent to HK$303.80, while smartphone maker Xiaomi dropped 4.1 per cent to HK$25.65.
China Tourism Group Duty Free fell 3.7 per cent to 300.02 yuan in Shanghai. Unionman Technology, which manufactures communications equipment, rose 239.4 per cent to 13.54 yuan from its listing price of 3.99 yuan.
Baidu underwhelmed investors on its trading debut in Hong Kong, closing at the same level as the IPO price of HK$252. The stock, which trades under the 9888 ticker, fetched between HK$251.60 and HK$256.60 during the day.
Smoore crashed 27 per cent to HK$48, after RLX Technology slumped 48 per cent in the US overnight. The draft guidelines single-handedly erased more than US$28 billion of market value from the two companies. China Boton Group, which also designs and manufactures e-cigarette products, sank 23 per cent to HK$4.90.
The Chinese government issued draft guidelines to regulate the e-cigarette industry, dealing a major blow to the world’s biggest market for tobacco products.
“Regulatory risks are highly unpredictable,” said Tang. “It could be problematic for e-cigarette makers, as tax imposed could increase and sales might also see some restrictions.”
Markets in the Asia-Pacific retreated. Japan’s Nikkei 225 fell 0.6 per cent, while South Korea’s Kospi fell 1 per cent. Australia’s S&P/ASX 200 slipped 0.1 per cent.
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