Hong Kong Stocks Decline Amidst Weak Earnings Signals and Mainland Selling

Hong Kong stocks experienced a decline as mainland Chinese funds capitalized on the recent market rally before the earnings reports from the nation's major tech companies. The Hang Seng Index dropped 1.7% to 17,781.36, following a 3.9% surge on Wednesday to a one-month high. Despite the recent rebound, the market struggled to sustain momentum amid China's inconsistent economic recovery, marked by shrinking manufacturing and deepening deflation alongside advances in retail consumption.

The Tech Index lost 2.3%, with Tencent Holdings leading the downturn as it reported a 9% decline in third-quarter earnings compared to the previous year. Alibaba Group, NetEase, and Lenovo also retreated ahead of their upcoming earnings reports.

Mainland investors were active in selling Hong Kong shares, offloading HK$9.5 billion (US$1.2 billion) worth of shares on Wednesday, the highest in over two months. This selling trend continued on Thursday, with an additional HK$130 million withdrawn.

The meeting between Chinese President Xi Jinping and U.S. President Joe Biden failed to uplift market sentiment significantly. While the leaders pledged to collaborate on artificial intelligence and military communications, they also agreed to maintain the status quo on Taiwan, a significant point of contention in U.S.-China relations. However, Biden's characterization of Xi as a dictator during a media conference in San Francisco introduced an element of tension that may impact the diplomatic relationship.

The Hang Seng Index had seen a rise of approximately 6% in November, marking a recovery from the previous three months' downturn. Nevertheless, concerns about China's economic slowdown, with manufacturing contraction and deepening deflation, continue to weigh on market sentiment.

In the broader Asian market, stocks erased gains, with Japan's Nikkei 225 declining by 0.7%, South Korea's Kospi losing 0.2%, and Australia's S&P/ASX 200 dropping 0.6%. The performance reflects the delicate balance Asian markets are navigating amidst economic uncertainties and geopolitical dynamics.

Additionally, Zhejiang XiaSha Precision Manufacturing experienced a notable debut on its first day of trading in Shenzhen, more than doubling to 110.55 yuan. This positive performance contrasts with the broader market trends and underscores the diverse landscape within the Asian equities space.

By fLEXI tEAM