Hong Kong stocks drop for third day, end week lower as Alibaba posts largest single-day drop on poor quarterly earnings

·3-min read

Hong Kong stocks tumbled on Friday after a weak earnings report by Alibaba Group Holding a day earlier once again shed light on the fallout of Beijing’s regulatory crackdown.

The e-commerce giant, which owns this newspaper, posted its largest single-day percentage decline on record. Its performance weighed on the Hang Seng Index, which retreated 1.1 per cent to 25,049.97 at the close. The index fell for the third day in a row, erasing earlier gains to close the week with a 1.2 per cent loss.

Alibaba’s 10.9 per cent decline to HK$139.10 and a 4.2 per cent drop at its health unit dragged down the city’s technology benchmark as well, which dipped 0.3 per cent.

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The e-commerce giant fell short of expectations when it reported second-quarter results on Thursday, slashing its outlook for full-year revenue. Its net income plunged 87 per cent to 3.4 billion yuan (US$532.6 million), missing forecasts of 24 billion yuan.

“While Alibaba’s guidance for the full-year remains solid, it doesn’t help in restoring investor confidence, especially when one of its key drivers – Ali Cloud – was badly impacted by the regulatory crackdown in the quarter and it started losing big clients,” said Will Shum, portfolio management director in Hong Kong at iFast Financial.

China’s big technology firms – hammered by regulatory uncertainty and tighter scrutiny – face poor earnings on the back of a slowing Chinese economy. Last week, Tencent Holdings reported its slowest earnings growth in two years.

The current market sentiment remains fragile, said iFast Financial’s Shum, as seen from Bilibili’s 11 per cent plunge on Thursday despite reporting earnings that beat expectations. The video-streaming operator halted trading on Friday, according to a HKEX filing, and announced plans to raise up to US$1.6 million through a convertible note sale.

Tencent slipped 0.2 per cent on Friday. A second bear on the WeChat operator surfaced last month, citing near-term pressure for downgrading the stock to “sell”.

Thursday’s underwhelming result triggered rounds of stock price downgrades by Morgan Stanley, Jefferies and Citigroup for Alibaba, which saw its only “sell” rating emerge in August when a trillion-dollar rout afflicting Chinese technology stocks dampened investors’ confidence in the sector.

A slew of report cards are expected next week from Chinese internet firms, such as food delivery platform operator Meituan, which slumped 1.6 per cent on Friday, and short video app firm Kuaishou Technology, which declined 2.2 per cent.

Separately, Country Gardens Services Holding plummeted 8.9 per cent after halting trading a day earlier, during which the property management firm raised HK$8 billion (US$1.02 billion) in a share placement.

Over on the mainland, China’s benchmark Shanghai Composite Index gained 1.1 per cent. Shandong Shanda Oumasoft, a software development company that started trading for the first time, soared 166 per cent in Shenzhen.

Markets in Asia-Pacific gained on Friday. Japanese and South Korean equities rose by at least 0.5 per cent, while the Australian benchmark inched up 0.2 per cent.

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