Hong Kong stocks slip again as global funds cut China bets, Fed stays hawkish

Hong Kong stocks fell for a third day as global funds trimmed their bets on Chinese stocks amid concerns the corporate earnings season will disappoint. Investors also braced for more losses after the Federal Reserve said its policy was still not too tight.

The Hang Seng Index weakened 0.4 per cent to 17,225.82 at the local noon trading break. The market was headed for a 3.3 per cent weekly loss, the most in two months. The Tech Index lost 0.3 per cent while the Shanghai Composite Index dropped 0.3 per cent to trade near an 11-month low.

Alibaba Group dropped 0.4 per cent to HK$78.85 while rival e-commerce platform operator JD.com eased 0.2 per cent to HK$97.05. Tencent weakened 1 per cent to HK$288.20, Baidu declined 3.3 per cent to HK$104.20 and Meituan retreated 2 per cent to HK$108.20.

CATL, the world’s biggest maker of EV batteries, said third-quarter earnings rose 10.7 per cent in the slowest gain since the start of 2022. China Telecom lost 1.3 per cent to HK$3.72 before its earnings results. Hong Kong Exchanges and Clearing nearly erased a 0.9 per cent drop. Results after the trading pause showed earnings topped market estimates.

Red flags for China’s earnings season as Alibaba, JD.com price targets slashed

A rebound in China equities will be “much longer delayed than we expected,” said Patrick Pan, strategist at Daiwa. China’s property debt woes, rising geopolitical risks and soaring US government bond yields have dominated markets, with investors ignoring better-than-expected economic data, he said.

Foreign investors have sold 22.4 billion yuan (US$3 billion) worth of mainland-listed stocks via Stock Connect this week through Thursday, bringing the net selling to 160 billion yuan over the past 10 weeks, the most on record, according to data compiled by Daiwa.

They have surrendered half of their purchases since China’s reopening in late 2022, Daiwa said. In Hong Kong, foreign ownership of H shares has declined to 37.1 per cent by September from 44 per cent in early 2020, it estimated.

Elsewhere, US Treasury yields surged overnight, with 10-year notes fetching a 16-year high of about 5 per cent. Fed Chair Jerome Powell said policymakers would be careful in raising interest rates and suggested its current policy was still not too tight. An escalation in Middle East tensions also sapped risk appetite.

Major Asian markets slipped on Friday. South Korea’s Kospi slumped 1.1 per cent and Australia’s S&P/ASX 200 lost 1 per cent. Japan’s Nikkei 225 dropped 0.3 per cent.