HSBC, Bank of China lead stock losses in Hong Kong before earnings reports

Hong Kong stocks erased losses after a late rally electric-car maker BYD before its expected record earnings. China’s biggest lenders including Bank of China slumped, while HSBC weakened amid concerns about their loans to the nation’s ailing property sector.

The Hang Seng Index closed little changed at 17,406.36 on Monday, after losing as much as 1 per cent. The Tech Index gained 1.3 per cent while the Shanghai Composite Index gained 0.1 per cent.

BYD climbed 0.2 per cent to HK$246.20, overturning a drop of as much as 2 per cent as the carmaker prepares to publish its third quarter results. Tencent jumped 1 per cent to HK$296, Alibaba climbed 0.7 per cent to HK$83, while Hansoh Pharma surged 6.3 per cent to HK$14.96 and Wuxi Biologics jumped 5.9 per cent to HK$50.55.

Banks were a drag on the market. Industrial and Commercial Bank of China or ICBC slumped 3.6 per cent to HK$3.71 and China Construction Bank lost 2.2 per cent to HK$4.46. Bank of China weakened 1.8 per cent to HK$2.71 and HSBC retreated 1.5 per cent to HK$57.20

Both Bank of China and HSBC missed market estimates for last quarter, their report cards today showed.

“Hong Kong stocks will continue to face long-term uncertainty, as it still remains to be seen how the recent supportive policies will shore up expectations of an economic recovery,” Dai Qing, analyst at Guotai Junan Securities wrote in a note on Sunday.

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The Hang Seng Index has dropped 2.3 per cent this month, set for a third straight monthly loss amid China’s shaky economic recovery and rising geopolitical tensions in the Middle East. Foreign investors have sold more than 160 billion yuan of A shares in the past three months, according to Stock Connect data.

Caution on banks prevailed after rival lender Standard Chartered last week reported worse-than-expected earnings for the third quarter because of high impairment charges related to its lending to mainland Chinese developers. Some 57 per cent of Chinese companies missed expectations in their third-quarter earnings so far, Goldman Sachs said in a report last week.

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HSBC set aside US$1.1 billion in expected credit losses and other credit impairment charges, in line with the same quarter in 2022, including about US$500 million tied to to China’s commercial real estate sector. Standard Chartered booked US$294 million of impairment, a 37 per cent increase from a year earlier, including US$186 million in the same sector.

Elsewhere, Guangdong Decro Film New Materials surged 140 per cent to 75.98 yuan on its first day of trading in Shenzhen.

Major Asian markets were mixed. South Korea’s Kospi gained 0.3 per cent while Australia’s S&P/ASX 200 lost 0.8 per cent and Japan’s Nikkei 225 dropped 1 per cent.