• Hang Seng Index closes 1.6 per cent lower, its biggest drop in three weeks, with Chinese technology stocks leading the pack of decliners
  • Hearing by US lawmakers raises fear that a law is in the offing to possibly get Chinese companies booted from American exchanges

Zhang Shidong

27 Oct 2021

Hong Kong stocks dropped by the most in three weeks, as a sudden flare-up in US-China tensions weighed on sentiment and spooked traders.

The Hang Seng Index fell 1.6 per cent to 25,628.74 at the close on Wednesday, the biggest decline since October 4. Chinese technology stocks proved to be a major drag on the broader market, with the Hang Seng Tech Index sinking 3.2 per cent. Tencent Holdings, Meituan and Alibaba Group Holding shed at least 3 per cent.

China’s Shanghai Composite Index lost 1 per cent.

Local stocks slumped after ties between Beijing and Washington took a sudden wrong turn, with some earlier signs suggesting an improvement in their relations. Official media reports said earlier that high-level officials from the two nations held “candid’’ talks this week.

US lawmakers held a hearing on how to protect American investors that invest in Chinese stocks over issues ranging from audits to fake company names and forced labour, fanning speculation that Congress will enact laws next year that will probably lead to the delisting of Chinese companies trading in the US. In another related development, the US Federal Communications Commission revoked the licence of a China Telecom subsidiary to operate in the nation.

“The competition between China and the US won’t have any change in the short term,” said Deng Lijun, an analyst at Northeast Securities. “There is still uncertainty on the future relationship between the two nations.”

Hotpot chain restaurant operator Haidilao International Holding tumbled 7.5 per cent as the worst performer on the Hang Seng Index. Alibaba Health Information Technology retreated 6 per cent, extending an 11 per cent decline a day earlier spurred by a profit warning. Meituan sank 5.1 per cent and Tencent lost 3 per cent.

Chinese pork processor WH Group rose 1 per cent after saying net income increased 12 per cent from a year ago in the first nine months. Citigroup expected a strong earnings recovery in the fourth quarter, saying the worst for the company was over.

The mainland’s exchanges had a busy day, with five companies making their debut. Jiusheng Electric, a maker of wires and cables, was the best performer with a jump of 69 per cent from its initial public offering price in Shenzhen. The only decliner was drilling equipment maker Shareate Tools, which dropped 14 per cent in Shanghai. The other three companies’ gains ranged from 28 per cent to 51 per cent.

US-listed Chinese stocks also slumped overnight, with the Nasdaq Golden Dragon China Index losing 3.8 per cent for the biggest decline in more than a month.

Most of the major markets in Asia-Pacific declined, with the sour mood in Hong Kong and China spilling over to the rest of the region. Asian traders also assessed the risk from accelerating inflation and China’s beleaguered property sector that has been rattled by the debt crisis of China Evergrande Group.