Hang Seng Index Drops 2%; Intense EV Price War Drags Li Auto Earnings

Li Chen
21 May, 2024
Hong Kong

Stocks in Shanghai and Hong Kong traded down after investors turned cautious. 

Benchmark indexes in China have been on the upswing for the last two months after regulators, the central bank, and policymakers signaled support for market-supportive measures. 

Stocks fell sharply after Li Auto, a leading electric vehicle maker, reported a sharp decline in earnings in its latest quarter, highlighting intense market pressures. 

The People's Bank of China held steady its two reference rates on Monday and announced the setting up of a lending facility for regional governments to purchase existing homes. 

Despite the flurry of announcements, investors are increasingly worried that stocks may have run too far from fundamentals, as corporate earnings may not pick pace in the near future and property market malaise is likely to drag on for years to come. 

The Hang Seng index dropped the most in five weeks after weak earnings from Li Auto dragged down other electric vehicle makers. 

 

China Stock Movers 

The CSI 300 index fell 0.4% to 3,676.48, and the Hang Seng index declined 2.1% to 19,234.33. 

Li Auto plunged 19% to HK$81.10 after the electric vehicle maker said net income in the first quarter declined 37% to 591.1 million yuan, or about $82 million, and revenue was 25.6 billion yuan. 

The electric vehicle maker said it plans to deliver between 105,000 and 110,000 vehicles this quarter, representing an increase of between 21% and 27% from a year ago. 

The company also estimated revenue in the quarter to range between 29.9 billion and 31.7 billion yuan, an increase between 4.2% and 9.7% from a year ago. 

BYD declined 3.8% to HK$218.40, Geely Automobile decreased 3.6% to HK$10.26, and Xpeng tumbled 7.8% to HK$31.75. 

Tech stocks were also among the leading decliners on the worry that valuations may have stretched too far from the sector's fundamentals. 

Tencent Holdings decreased 3.4% to HK$383.60, JD.com fell 2.4% to HK$133.50, and Baidu fell 3.2% to HK$104.0.