Analysts have been cutting their earnings on Asian companies, Goldman and BofA say; downward revisions have quickened since mid-March: Morgan Stanley
HSBC shares struggled amid pressure by key investor Ping An Insurance to revamp and list its Asian business
Hong Kong
Stocks in Hong Kong declined on concerns corporate earnings are failing to catch up with the broader economic recovery in the region, pressuring policymakers to deliver a stronger dose of stimulus. HSBC erased a 1 per cent loss amid calls to reorganise its Asian operations.
The Hang Seng Index dropped 0.6 per cent to 19,959.94 at trading day close, slipping below the 20,000 level for the first time since March 28. The Tech Index retreated 0.2 per cent, while the Shanghai Composite weakened 0.8 per cent.
Alibaba Group lost 1.2 per cent to HK$86.90 while Tencent slid 1.2 per cent to HK$345. Macau casino operator Sands China slumped 1.2 per cent to HK$29.10. Sportswear maker Li Ning tumbled 3.6 per cent to HK$56.90 and developer Country Garden slipped 2.4 per cent to HK$2.06.
Gains of 3.4 per cent to 4.9 per cent in Alibaba Health, CSPC Pharmaceuticals and BYD helped shore up the city’s benchmark index.
Analysts have trimmed their earnings on Asian companies outside Japan by 1.7 per cent since the start of the quarter, mostly in tech-driven Taiwan and South Korea, according to Goldman Sachs, with Chinese companies suffering a 1 per cent cut. The negative trend has re-accelerated since mid-March, Morgan Stanley said.
Analysts trimmed 12-month forward earnings of companies in the Hang Seng China Enterprises Index by 9.5 per cent last week, according to Bank of America, on top of a 10 per cent cut in the preceding week. Onshore companies that missed 2022 earnings targets were three times higher than those that beat, the bank said.
“The divergences underlying the economy call for targeted [policy] support,” Goldman said. Some industry-level policies, such as property and internet, could be loosened further as policymakers continue their pro-growth rhetoric and to focus particularly on boosting confidence, the firm added.
Stocks also declined as investors worried about intensifying tech rivalry between China and the West, after several measures to curb exports of advanced chip-making equipment to Chinese companies. Media reports including from Politico suggested more curbs are being mooted.
“We saw some investors try to bargain hunting below 20,000 points. However, the market still worries that the US government will further tighten chip sanctions on China,” said Kenny Wen, head of strategy based in Hong Kong at KGI Securities. Recent insider selling at big tech companies also weighed on sentiment, he added.
HSBC closed unchanged at HK$55.95, after slipping as much as 1.1 per cent amid a war of words with Ping An Insurance (Group). The Chinese insurer, its biggest corporate shareholder, has become more vocal in pushing the UK lender to revamp and list its Asian business to create more value for investors.
Elsewhere, property stocks weakened, with 11 of the 13 members in the Hang Seng Property Index losing ground. Longfor Group fell 2.4 per cent while China Resources Land declined 1.6 per cent to HK$36.85.
One company began trading today. Chongqing Millison Technologies closed 8.6 per cent lower at 29.55 yuan in Shenzhen.
