Hang Seng falls below 19,000 as Hong Kong stock markets tumble on mixed gains, hawkish US Fed stance

Hong Kong stocks fell for a third straight day and the benchmark breached psychological support at 19,000 as patchy corporate earnings sparked investor anxiety. Optimism also weakened after hawkish comments from US Federal Reserve officials.

The Hang Seng Index lost 1.4 percent to 18,930.02 during the local trading break, its lowest level in two weeks. The Tech Index lost 1.7%, while the Shanghai Composite Index weakened by 1%.

E-commerce Alibaba fell 3.6 percent to HK$80 and JD.com lost 2.9 percent to HK$125.20 after rival PDD posted a 131 percent jump in revenue last quarter to gain market share intense competition. Gaming company NetEase lost 4.7% to HK$146.40 and smartphone maker Xiaomi lost 2.6% to HK$18.94 ahead of their reports.

The logo of Temu, an e-commerce platform owned by PDD Holdings, is seen on a mobile phone displayed in front of its website, in this illustration picture taken April 26, 2023. Photo: Reuters — The logo of Temu, an e-commerce platform owned by PDD Holdings, is seen on a mobile phone displayed in front of the company’s website, in an illustrative photo taken on April 26, 2023. Photo: Reuters

“The Hong Kong market is currently experiencing a correction while local market sentiment is nearing its lowest point,” analysts at independent research firm Horizon Insights said in a note on Wednesday. They added that the market now needs stronger macroeconomic readings for May to find reasons to continue growth.

The city’s benchmark index fell 3.2 percent this week, marking its worst weekly performance since January. Stimulus-driven optimism waned and technical indicators signaled the four-week rally was likely to drag on, while uneven improvement in corporate earnings also prompted profit-taking.

Hong Kong’s first-quarter earnings growth was worse than the Asia region average of 13%, while growth in mainland China was also weak, with almost half of company profits missing expectations, according to data compiled by HSBC.

“Chinese corporate profits have failed to recover despite a moderate recovery in mainland China’s economic output over the past 12 months,” Arthur Budaghyan, chief emerging markets specialist and China strategist at BCA Research, said in a note. He added that the economic recovery will remain difficult as deflationary pressures persist and investors should remain cautious in chasing growth.

Also adding to the losses were local developers who pulled out, with Henderson Land losing 3.4% to HK$25.90 and New World Development falling 3.3% to HK$9.61 after meeting minutes The US Federal Reserve was more hawkish than expected. Interest rates in Hong Kong go in the same direction as in the US because the local currency is pegged to the US dollar.

Central bank officials were disappointed with the latest inflation data and, according to the latest data, “disinflation is likely to last longer than previously thought.” Fed Minutes showed.

Meanwhile, JPMorgan Chase said the deterioration in China’s real estate market is not yet on solid footing, as last week’s unprecedented aid package may prove insufficient to turn around the sector.

The mood was mixed in other key Asian markets. Australia’s S&P/ASX 200 index fell 0.5 percent, South Korea’s Kospi gained 0.4 percent and Japan’s Nikkei 225 rose 1.2 percent.