China Bull Market Faces Correction After Weak Earnings Growth Outlook

Li Chen
23 May, 2024
Hong Kong

Stocks in Shanghai and Hong Kong headed lower amid earnings worries and a lack of investor interest. 

Benchmark indexes in Shanghai and Hong Kong fell around 1% after a 6-week market rally appeared to peter out amid a lack of catalysts. 

Investor enthusiasm has been waning for the second week in a row after market indexes retreated from their 10-week highs as the earning season nears its end. 

Most mainland Chinese companies are reporting weaker-than-expected earnings, and earnings growth for Hong Kong companies also lagged behind market expectations. 

Moreover, investors are increasingly skeptical of the effectiveness of the regulatory support announced for the property market because property prices are still too high in the top 10 largest cities when compared to wages. 

Property developers in Hong Kong were also under pressure after the latest minutes of the Federal Reserve's policy meeting showed policymakers are worried about the lack of progress on the inflation front. 

Hong Kong's interest rates are likely to follow higher U.S. interest rates as the city's currency is pegged to the U.S. dollar. 

Market indexes in Hong Kong and Shanghai are likely to revisit lows of the year reached earlier in January, with lack of economic catalysts and little improvement in earnings.

 

China Stock Movers 

For the week, the Hang Seng index is down about 4%, and the CSI 300 index has fallen more than 1.5%. 

The CSI 300 index dropped 0.9% to 3,651.79, and the Hang Seng index fell 1.4% to 18,930.02. 

Henderson Land Development dropped 3.7% to HK$25.80, Sun Hung Kai Properties declined 0.8% to HK$79.25, China Vanke fell 5.6% to HK$6.62, and Longfor Group Holdings fell 3.7% to HK$14.28. 

PDD Holdings gained 0.5% to $147.50 in New York after the e-commerce company reported sharply higher revenue in the March quarter. 

Temu-parent said revenue soared 131% to 86.8 billion yuan, or US$12.0 billion, and net income attributable to stockholders soared 246% to 28 billion yuan, or US$3.8 billion. 

Revenue from transaction services surged 327% to 44.4 billion yuan, and revenue from marketplace services increased 56% to 42.5 billion yuan.