Hong Kong stocks weaken as mass Covid-19 testing reignites China lockdown fears while Alibaba gains on price upgrades

·3-min read

Hong Kong stocks approached a two-week low as a resurgence in Covid-19 cases in mainland China led to a mass testing process and undermined bets for a swift economic recovery. Alibaba Group advanced as analysts raised their price targets.

The Hang Seng Index fell 1.2 per cent to 21,586.66 at the close, the lowest level since June 23. The Hang Seng Tech Index retreated 1.2 per cent, while the Shanghai Composite Index lost 1.4 per cent.

Shanghai has started mass Covid-19 screening in nine of the 16 districts in the financial hub after the city of 25 million reported new infections over the past few days. The mass testing this week is stoking jitters after the economic toll from a two-month citywide lockdown in April and May.

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Chinese pork processor WH Group tumbled 4 per cent to HK$5.81 after the nation’s planning body said that it will crack down on any speculative practices that ramp up pork prices. Oil producers PetroChina and CNOOC dropped more than 4 per cent after crude-oil futures tumbled overnight on recession concerns.

China is still in the process of transitioning to a new development paradigm and “facing uncertain development in pandemic control,” said Redmond Wong, a strategist at Saxo Markets. “Long-term investors should be patient in accumulating positions.”

China’s zero-Covid policy has remained a key concern among investors, after the Shanghai lockdown uprooted production at Tesla and electronics plants in the neighbouring Jiangsu province. China has defended the policy, saying that it was the in the interest of protecting people’s health and lives.

Alibaba Group Holding, the owner of this newspaper, bucked the decline in the broader market. The stock climbed 1.6 per cent to HK$117 after Daiwa, Nomura and JPMorgan lifted their price targets for the company’s Hong Kong and US-listed shares, citing improved sentiment and positive news for its Ant Group unit, among others.

ClouDr Group, which provides medical information services, dropped 7.5 per cent to HK$28.20 on the first day of trading in the city.

Three companies debuted on the mainland’s exchanges. Luster LightTech, a maker of optical devices, surged 55 per cent to 34.08 yuan in Shanghai. Chengdu Shengbang Seals, a maker of rubber polymer products, rose 38 per cent to 57.13 yuan in Shenzhen. Shenzhen Zecheng Electronics dropped 7.1 per cent to 10.03 yuan on the Beijing exchange.

Other major markets in Asia declined on Wednesday as traders fretted that aggressive interest-rate increases by the Federal Reserve will tilt the US economy into a recession. Flight to safety dominated trading in global markets, with gains in US government bonds and the US dollar.

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