Tech stocks sink in Hong Kong in worst sell-off since mid-November amid valuation jitters, rotation to reflation plays

Iris Ouyang
·3-min read

Hong Kong stocks slumped, dragging the benchmark index down from near the highest in more than two years, as technology stocks suffered their worst beating in more than three months. HSBC gained, tempering the market sell-off.

The Hang Seng Index fell 1.1 per cent to 30,319.83 at the close of trading on Monday, reversing a 0.5 per cent gain during the day. The Shanghai Composite Index slipped 1.5 per cent to 3,642.44 to cap its worst day since January 28.

The Hang Seng Tech Index tumbled 5.5 per cent as 30 of its 31 constituents registered losses. The sell-off was the most since a 6.2 per cent slide on November 11 in the week after a clampdown on fintech companies. A similar barometer in Shenzhen’s ChiNext market fell 4.5 per cent.

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Meituan crashed 5.5 per cent to HK$400.20 while Alibaba Group Holding, the owner of this newspaper, dropped 2.5 per cent to HK$250.60. Tencent Holdings retreated 3.7 per cent to HK$713.50. Xiaomi Corp added to the pressure as the stock declined 5.4 per cent to HK$29 after denying Chinese media reports that it was planning to produce electric vehicles.

Schroders expressed a cautious view on internet or e-commerce companies, given high valuations and regulatory risks, “which could cloud things for the sector in the near term,” the UK money manager said in an emailed note on February 18.

“The whole theme is now about reflation and economic reopening,” said Alex Wong, a director at Ample Finance Group. “People are switching into laggards and selling [tech] stocks which have recorded big gains” while southbound funds are expected to support local shares for some time, he added.

Reflecting the reflation plays, resources stocks surged. Zijin Mining advanced 6.6 per cent in Hong Kong and 7.3 per cent in Shanghai. China Molybdenum jumped 5.9 per cent in Hong Kong.

HSBC jumped 2.1 per cent to HK$46.50. The lender, with 7.9 per cent weight in the benchmark index, is due to unveil its fourth-quarter results on Tuesday, with investors eager for the local note-issuing bank to restart dividend payout. Standard Chartered added 0.9 per cent to HK$53.45 and ICBC rose 2.2 per cent to HK$5.13.

Telecommunications companies also gained with China Mobile – one of the Stock Connect’s consistent picks – climbing 3.5 per cent to HK$55.65. Mainland stock fund managers spent HK$3.7 billion (US$477 million) in net purchases of Hong Kong stocks on Friday, according to stock exchange data.

Markets in Asia-Pacific region also surrendered most of their gains at the close. The Nikkei 225 jumped 0.5 per cent and the Kospi Index in South Korea dipped 0.9 per cent, while Australia’s S&P/ASX 200 declined 0.2 per cent.

Some of China’s biggest stocks slid amid concerns about monetary policy tightening after the central bank drained liquidity last week and further curbed lending. Several “bubble stocks” extended losses, with liquor distiller Kweichow Moutai down 7 per cent and China Tourism Duty Free Group sliding 8.9 per cent.

Mainland-listed A shares are likely to underperform compared with other markets in the world, Wong of Ample Finance Group said, as Beijing is seen to control leverage ratio to contain risks.

China Fortune Land Development plunged by another daily cap of 10 per cent, after losing as much on Friday when the stock resumed trading after a halt. The developer is facing a liquidity crunch with 5.26 billion yuan (US$813 million) of overdue loans.

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