Hong Kong stocks slip amid earnings jitters, relief from yuan rebound short-lived
Hong Kong stocks fell, extending last week’s losses, as investors awaited earnings announcements this week from nearly a third of the companies that comprise the 82-member benchmark.
The Hang Seng Index slipped 0.2 per cent to 16,473.64 at the close, reversing a gain of as much as 0.7 per cent spurred early in the session from a rebound in the yuan. The Hang Seng Tech Index dropped 0.5 per cent and the Shanghai Composite Index slid 0.7 per cent.
Property developer China Resources Land fell 1.2 per cent to HK$23.95 and China Merchants Bank slipped 0.8 per cent to HK$29.95. Both will unveil their earnings later on Monday. Hong Kong Exchanges and Clearing slid 2.1 per cent to HK$233.20 and personal computer maker Lenovo Group tumbled 6.1 per cent to HK$9.14.
“The main theme this past week was corporate results that have disappointed expectations, with the earnings beat-miss ratio at -22 per cent, leading to more earnings downgrades,” said Chetan Seth, an analyst at Nomura Holdings, in a note. “This dashes hopes for a sustained recovery in Hong Kong and China stocks. Investors should continue to have some allocation on companies that are prime for increased share buy-backs and dividends, as a defensive strategy to protect against macro headwinds.”
A rebound engineered by China’s market-intervention measures, launched earlier this month, risks being short circuited by corporate earning shocks. The Hang Seng Index dropped 1.3 per cent last week dragged down by a batch of weak earnings from major companies including Tencent Holdings, Ping An Insurance and Li Ka-shing’s two flagship listed units.
The Chinese currency appreciated 0.3 per cent to 7.2083 against the US dollar for the biggest daily gain this year after the People’s Bank of China set a higher daily reference rate.
“The daily fixing has served as an important tool for the central bank to extend support for the currency and guide market expectations over the past few months,” said Edith Qian, equity strategist at CGS International Securities.
But the bounce-back in the yuan failed to boost sentiment for long as the focus returned to corporate earnings.
Some 26 companies on the Hang Seng Index are due to release this week their full-year results for 2023, including index heavyweights BYD, Industrial and Commercial Bank of China and China Construction Bank.
“The rangebound trading pattern will go on,” said Lin Rongxiong, an analyst at SDIC Securities. “If the market need to break out of the pattern, we need to see a trough of corporate earnings in the following half year.”
Citic Securities, China’s biggest brokerage by market value, sank 3.9 per cent to HK$13.18, its lowest close since November 4, 2022, after the Shenzhen exchange said that it would scrutinise the company’s sponsor role in an IPO. Its Shanghai-listed shares slumped 4.9 per cent to 19.50 yuan for the steepest loss in 18 months.
Bucking the market was Meituan, China’s biggest on-demand delivery company, which surged almost 8 per cent to HK$95.20 after reporting a turnaround in its fourth quarter earnings. Aluminium producer China Hongqiao group jumped 8.5 per cent to HK$8.02 after announcing full-year profit increased 32 per cent in 2023 from a year ago. Both companies reported their results after the market closed on Friday.
“We believe Meituan is on a path of solid execution with its ‘food plus platform’ strategy that targets a mass audience with high-frequency services,” said Jefferies in a report. “It is able to create a strong self-reinforcing ecosystem covering about 600 million annual transacting users and over seven million merchants.”
Citigroup expects China Hongqiao’s earnings to beat estimates this year, as its aluminium smelting margins is sustained because of lower coal and electricity costs.
Investors are also assessing comments from Chinese Premier Li Qiang who said at a forum over the weekend that China will remove more barriers for foreign companies including market access, policy tendering and cross-border data flow. The world’s second largest economy is struggling with an exodus of foreign investments that has exacerbated a slowdown in growth.
Elsewhere, Hubei Gabriell Optech, which makes optical glass products, jumped 127 per cent from its IPO price to 22.71 yuan on the first day of trading in Beijing.
Other major Asian markets showed mixed trends. Japan’s Nikkei 225 slipped 1.2 per cent and South Korea’s Kospi retreated 0.4 per cent, while Australia’s S&P/ASX 200 added 0.5 per cent.
