To The Moon

• ‘The market simply doesn’t have confidence in the current recovery,’ says Wang Qi at MegaTrust Investment, citing excessive valuations, among others

• So far, Chinese onshore companies that trailed 2022 earnings targets outnumbered those that beat by almost three to one, according to Bank of America

A man looks at his smartphone near a display showing stock prices at a brokerage house in Shanghai. Photo: AP

Hong Kong stocks fell to a four-week low, led by tech leaders including Alibaba Group, as some investors cautioned valuations may have risen well ahead of earnings and economic recovery in mainland China.

The Hang Seng Index slumped 1.4 per cent to 19,684.49 at 10.30am local time, the lowest level since March 28. The Tech Index tumbled 2.9 per cent, while the Shanghai Composite retreated 0.2 per cent.

Alibaba Group declined 2.6 per cent to HK$84.65 while Tencent Holdings slipped 2.3 per cent to HK$337. HSBC dropped 0.8 per cent to HK$55.50 and developer Longfor Group lost 0.5 per cent to HK$22. Gains of 1 per cent to 1.7 per cent in China Life, CK Hutchison and CNOOC tempered losses.

“The market simply doesn’t have confidence in the current recovery,” Wang Qi, CEO of MegaTust Investment in Hong Kong, said in a recent note to clients. “A recovery may already be priced in for some sectors, like the airlines and duty free shopping. The market seems to have priced in the good news, but not the potential risks.”

The Hang Seng Index has risen 0.8 per cent this month in a wobbly start to the quarter, following China’s stronger-than-expected GDP data. Concerns about weak earnings and US tech investment curbs have stoked risk aversion, before the local markets pause for a holiday next week.

Analysts trimmed the 12-month forward earnings of companies in the Hang Seng China Enterprises Index by 9.5 per cent last week, according to Bank of America, on top of a 10 per cent cut in the preceding week. So far, onshore companies that missed 2022 earnings targets have outnumbered those that beat by almost three to one, it added.

One company began trading today. Rongcheer Industrial Technology dropped 3.7 per cent to 31.14 yuan in Shenzhen.

Elsewhere, Asian markets were mixed. The Nikkei 225 in Japan added 0.5 per cent while the Kospi Index in South Korea dropped 0.4 per cent and the S&P/ASX 200 in Australia fell 0.1 per cent.