Hong Kong Stocks Experience Third Weekly Slump as Alibaba, Tencent, and BYD Face Losses, Surrendering Earlier Gains

 

Hong Kong stocks faced their third consecutive week of losses, marking the market's most challenging start to a year since 2016. Investors remain anxious about China's economic outlook, and despite certain valuation measures hitting near all-time lows, the downward trend persisted.

On Friday, the Hang Seng Index dipped by 0.5% to 15,308.69, nearing its lowest point since October 2022. This brought the cumulative decline for the week to 5.9%. The earlier rally of up to 1% was erased, and the Tech Index experienced a 1.5% loss. The Shanghai Composite Index also slipped by 0.5%, reaching its lowest level since May 2020.

Notable stocks in the region saw declines, with Tencent dropping 2.3% to HK$271.20, Alibaba slipping 1.7% to HK$65.55, and JD.com tumbling 2.5% to HK$84.15. Electric vehicle maker BYD weakened by 0.4% to HK$195.60, while Li Auto experienced a 2.7% decline to HK$110.20. Hansoh Pharma and Wuxi Biologics also faced setbacks, sliding 3.9% to HK$12.36 and 2.6% to HK$28.35, respectively.

This week's loss is the most significant in nearly 10 months, marking a third consecutive weekly decline in the new year. The persistent "chronic disappointment" over China's stimulus and policy easing measures has led foreign investors to reduce their allocation, reaching the lowest net underweight in over a year.

China's central bank opted to keep its key lending rates unchanged for the fifth consecutive month. Government reports revealed that growth fell below forecasts in the last quarter, and home prices experienced the most substantial decline since 2015 in December.

Chinese stocks listed in Shanghai and Hong Kong have reached historically low valuations. Investors are currently willing to pay only 1.2 times the book values of companies listed in the city, the lowest since the inception of the Shanghai Composite Index in 2002.

Eva Lee, the head of Greater China Equities at UBS Global Wealth Management, described the past week as "very painful" and emphasized a defensive stance until there's more policy visibility from the National People's Congress in March.

Foreign investors continued their net outflows, selling 5.2 billion yuan (US$730 million) of Chinese stocks on Friday, marking the sixth consecutive day of such outflows. The total net selling in 2024 has now reached 31.5 billion yuan, following a record US$26.2 billion sell-off in the previous five months.

The three-week sell-off in Hong Kong has driven the valuation of local stocks to historical lows, with the average price-to-book value of the benchmark falling to 0.85 times. This is close to the record low of 0.82 times recorded in October 2022, according to Bloomberg data.

Despite the challenges in Hong Kong, other major Asian markets experienced gains, with Japan's Nikkei 225 advancing by 1.4%, South Korea's Kospi adding 1.3%, and Australia's S&P/ASX 200 gaining 1%.

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