HK, China markets slide as concerns rise about overheated stocks, cases of coronavirus grow in US

15-Jul-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong and mainland markets slid, as concerns mount that some stocks may be overheated and the pace of economic recovery in the US the world’s largest economy is threatened by a surge in Covid-19 cases.

The Hang Seng fell as much as 1.4 per cent to 25,388.36 in early afternoon trading Tuesday, with losses led by consumer discretionary and information technology stocks.

High-flying Geely Automobile fell as much as 4.6 per cent, after rising on seven of the past eight days. Investors have been giving China auto stocks a fresh look as the latest data in June signalled recovering sales after the worst of the coronavirus and the sector remains comparatively cheap.

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Casino stocks surged as Guangdong province lifted 14-day quarantine restrictions that have contributed to the empty baccarat and other tables in Macau, the world’s top gaming town.

Galaxy Entertainment shot up as much as 11.1 per cent, while Sands China jumped as much as 8.9 per cent.

Some of this year’s outperformers sank, as traders scrambled to take profits.

Tencent fell about 3 per cent to HK$525, while Alibaba dropped 5.7 per cent after the lunch break. The pair were the most traded stocks.

Other recent big winners tumbled as well. Semiconductor Manufacturing International Corp. plunged as much as 7.4 per cent. SMIC has seen its shares shoot up more than 100 per cent over the past 30 days, as it moves to list A shares in the mainland.

Meituan Dianping, China’s largest on-demand food delivery service, fell as much as 10 per cent before narrowing losses to 4.7 per cent after the lunch break.

Meanwhile, the Shanghai Composite Index finished down 0.8 per cent at 3,414.62, but still has gained in eight of the past 10 trading sessions. Property stocks led the decline. Popular Kweichow Moutai fell 1.1 per cent to 1,762 yuan, making it the biggest contributor to the benchmark’s overall decline.

The index has risen nearly 17 per cent in the past 30 days, underscoring worries grow that stocks in China are rising too much, too quickly.

The Shenzhen Composite Index finished down 0.9 per cent to 2,309.57, after slipping as much as 2.2 per cent. It has risen on eight of the past 10 trading sessions, including a 3.5 per cent jump Monday.

China markets have been steaming ahead toward a $10 trillion valuation mark last seen in 2015, when stocks collapsed, wiping out more than $5.2 trillion in market capitalisation.

The meltdown of 2015 is very much on the minds of Chinese authorities, who are balancing the benefits and risks of investor enthusiasm in the country’s stock markets. Borrowing to buy stocks is at a five-time high, although it is less than half of what it was in the 2015 market rout.

Investor sentiment has been buoyed by a stream of data that has show China’s economy is steadily recovering.

On Tuesday, China’s trade data showed exports and imports recovering in June from the coronavirus lockdown, and beating estimates. Exports rose by 0.5 per cent in June year-on-year, versus a minus 3.3 per cent decline in May. Imports rose by 2.7 per cent year-on-year, as compared to the minus 16.7 per cent in May.

“Looking forward, we expect the Chinese economy to stay in the recovery tranche, underpinned by ongoing work resumption and policy easing,” said Michelle Qi, chief investment officer of equities at Eastspring Investments. “… Further market upside would come from continued improvement in economy and corporate earnings.” Potential headwinds, she said, include the virus and its impact on external demand for China’s products.

Meanwhile, the Hang Seng Index is in its second week of a bull market, with overall optimism fuelling the run-up even in the face of Beijing’s tightening grip, a rise in locally transmitted Covid-19 cases leading to tough new restrictions and a stubborn recession. Instead, investors are looking at the rush of new listings in the city and money pouring in from the mainland to snap up stocks.

Investors are also watching souring relations between Beijing and Washington, as the US rejected China’s claims over the South China Sea and China sanctions, the latest tit-for-tat between the world’s two largest economies.

Other stocks of note in Hong Kong include Chinese biotech Beigene, which shot up as much as 13.5 per cent, on plans to raise $2.1 billion by placing out 145.8 million new shares to investors including California-based pharmaceutical giant Amgen and New York-based hedge fund Baker Bros Advisors.

One stock debuted in the mainland.

Niutech Environment Technology Corp, a recycler of scrap tires and plastic waste, soared 240 per cent on the Star board, where there are no limits on gains in the first week of trading.


Category: Hong Kong

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