WuXi AppTech, Li Auto lead Hong Kong stock losses on earnings concerns as bets on Fed rate cut before May fade

Fourth-quarter earnings of Chinese companies are trailing those of peers in the rest of Asia, according to Goldman Sachs
Sentiment remains cautious ahead of the Federal Reserve’s policy meeting later this week after strong February inflation reports

Hong Kong stock market

Jiaxing Li

Published: 10:28am, 19 Mar 2024

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Hong Kong stocks slipped, extending a retreat from a three-month high, as weak corporate earnings and guidance weighed on sentiment and Chinese authorities stayed away from major stimulus measures to rejuvenate the economy.

The Hang Seng Index declined 1.2 per cent to 16,529.48 at the close on Tuesday. The Tech Index fell 1.8 per cent, while the Shanghai Composite Index lost 0.7 per cent.

WuXi AppTech tumbled 7.5 per cent to HK$39.55, the lowest level in over a month, after the company gave downbeat 2024 earnings guidance because of external uncertainties after being singled out by US lawmakers for possible sanctions. Its affiliated company WuXi Biologics slumped 5.7 per cent to HK$13.92, the lowest since December 2017.

E-commerce group Alibaba Group slipped 1.3 per cent to HK$71.10 and food delivery platform Meituan retreated 1.3 per cent to HK$89.20. Smartphone maker Xiaomi fell 0.5 per cent to HK$14.86 and electric-car maker Xpeng tumbled 1.7 per cent to HK$39.80 before their earnings reports later on Tuesday. Li Auto slumped 8 per cent to HK$127.90 after local media reported that the sales of its new model missed internal targets.

“Hong Kong stocks are likely to face more pressure during the earnings season,” May Zhao, an analyst at Zhongtai Securities in Hong Kong, said in a note on Monday. “They still need a meaningful recovery in fundamentals to support a run-up.”

So far, 126 companies accounting for 26 per cent of MSCI China’s market capitalisation have released their fourth-quarter earnings, according to Goldman Sachs, producing a 14 per cent gain in net income on average. They trailed the 20 per cent average gain by companies in Asia outside Japan, the US bank said.

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The Hang Seng Index reached a three-month high on March 12, after surging 14.3 per cent from this year’s low in mid-January. Since then, the rally has lost momentum after fresh data reignited concerns about China’s weak recovery and poor earnings outlook and Beijing’s aversion to aggressive stimulus measures.

Sentiment remains cautious ahead of the Federal Reserve’s meeting this week, with traders cutting bets on a rate cut in March and May after a strong February inflation data.

Key Asian stock markets were mixed. Japan’s Nikkei 225 erased losses to post a 0.7 per cent gain, after the Bank of Japan scrapped its negative interest rate policy. South Korea’s Kospi Index tumbled 1.1 per cent, while Australia’s S&P/ASX 200 gained 0.4 per cent.