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

Hong Kong’s stock market fell for a third straight day and the benchmark breached psychological support at 19,000 as patchy corporate earnings left investors nervous. 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% to HK$80 and JD.com lost 2.9% to HK$125.20 after rival PDD reported a 131% revenue surge last quarter in a bid to gain more market share in conditions of 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.

Do you have questions about the most important topics and trends from around the world? Get answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyzes and infographics from our award-winning team.

In this illustration photo taken on April 26, 2023, the logo of Temu, an e-commerce platform owned by PDD Holdings, can be seen on a mobile phone displayed in front of the company’s website. Image: Reuters alt=Logo Temu, an e-trading platform owned by PDD Holdings, can be seen on a mobile phone displayed in front of its website, in this illustration taken on April 26, 2023. Image: 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.

The Fed’s latest minutes show that central bank officials were disappointed with the latest inflation data and believed that “disinflation is likely to last longer than previously thought.”

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.

This article originally appeared on the South China Morning Post (SCMP), the most authoritative newspaper reporting on China and Asia for over a century. For more SCMP stories, visit the SCMP app or follow SCMP i on Facebook Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.