• Hang Seng Index declines 0.3 per cent as financial and tech stocks pace losses
  • China’s economy grew less than expected 4.9 per cent last quarter, while factory production cooled last month amid a power crunch

Iris Ouyang

18 Oct 2021

Hong Kong stocks slipped as risk appetite waned after official reports showed China’s economy slowed more than market expected last quarter and manufacturing cooled last month amid a power crisis. Tech stocks retreated on regulatory concerns.

The Hang Seng Index fell 0.3 per cent to 25,253.57 at the local noon break while the Shanghai Composite Index declined 0.4 per cent to 3,559.96. Financial stocks led losses with Ping An Insurance and China Merchants Bank retreating by more than 2 per cent, while ICBC fell 1.6 per cent.

The Hang Seng Tech Index slid 1.2 per cent, paced by 1,8 per cent loss in Meituan. Alibaba Group Holding and Tencent Holdings dropped by at least 0.7 per cent while Kuaishou slumped 5.5 per cent. China’s Ministry of Industry and Information Technology said it will deepen the scrutiny on internet companies under an ongoing six-month campaign.

China’s gross domestic product expanded 4.9 per cent from a year earlier, the statistics bureau said, trailing the consensus for a 5 per cent gain in a Bloomberg survey. The economy grew 7.9 per cent and 18.3 per cent in the preceding two quarters. The trend implies the property sector fallout will be a significant drag in the coming quarters, according to Fidelity International.

“We are starting to see some tentative signs of policy inflection, but much more will need to be done to halt the tremors in the property sector and the broader slowdown,” said Mo Ji, chief China economist at Fidelity. “However, even significant policy easing now, which is still unlikely in our view, will take time to propagate into the real economy, leaving near-term risks skewed to the downside.”

Other reports on Monday showed industrial production rose 3.1 per cent last month, versus a 3.8 per cent consensus estimate, reflecting the impact of an energy shortage in many provinces. Gain in retail sales was better than expected at 4.4 per cent.

China’s data dump offers one of several tests to stock investors grappling with a myriad of concerns in the economy, including shrinking corporate earnings and a slowdown in property sales amid debt defaults by indebted developers. Investors will look at China Evergrande Group crisis as the 30-day grace period for two interest payments ends later this week.

China’s central bank Governor Yi Gang said Sunday that China can contain the risks brought on by Evergrande, Bloomberg reported. The central bank on Friday said “the risk of spillover to the financial industry is controllable.”

Three stocks began trading for the first time. In Shanghai, Beijing Fjr Optoelectronic Technology more than doubled to 45.65 yuan in Shanghai while Beijing Asiacom Information Technology jumped 76.3 per cent to 37.79 yuan in Shenzhen and Acrobiosystems rose 52 per cent to 170.90 yuan.