Foreign Investor Exodus Adds to Selling Pressure in Hong Kong

Li Chen
21 Aug, 2024
Hong Kong

Stocks in Shanghai and Hong Kong accelerated their declines amid weakening economic backdrops and a lack of earnings growth catalysts. 

The Hang Seng index plunged 1% and wiped out this week's gains, and the CSI 300 index declined 0.2%. 

The latest selloff was sparked by a weakness in tech stocks after a Bloomberg News report suggested that Walmart is looking to sell its stake in the online platform JD.com and increase its investment in its operations. 

The tech stocks turned lower following the Walmart news and added to the growing exodus of foreign investors from Chinese stocks trading in Hong Kong. 

China, the second-largest economy in the world, is undergoing deep structural changes, weakening consumer confidence, and residential property market malaise that shows no signs of ending. 

Increasingly, foreign investors are losing patience with Chinese markets amid a lack of consistent policy support and a weak earnings growth outlook. 

While foreign investors are significantly cutting their exposure to Chinese stocks, in particular tech stocks, domestic investors are searching for undervalued companies with stock buyback plans. 

So far in the year, stock buybacks in Hong Kong have surged 30%, and to a record high of HK $164.8 billion, or $21.2 billion, according to data provider Hang Seng Indexes Company. 

 

China Stock Movers 

The Hang Seng index decreased 1% to 17,329.24 and the CSI 300 index dropped 0.2% to 3,327.69. 

Alibaba Group declined 1.2% to HK $79.45, Baidu decreased 2% to HK $84.85, Xiaomi fell 1.2% to HK $17.46, and Kuaishou Technology plunged 10.5% to HK $39.80. 

Sunny Optical Technology advanced 8.5% to HK $49.50, and the optical lens and camera module maker reported better-than-expected earnings. 

Revenue in the first half increased 32.1% to 18.8 billion yuan from 14.3 billion yuan, and profit attributable to shareholders soared 147% to 1.1 billion yuan from 459.4 million yuan a year ago. 

Diluted earnings per share jumped to 99.1 yuan from 39.95 yuan a year ago. 

Despite today's bounce, Sunny Optical stock has collapsed over the three years from a high of HK $252.60. 

Hong Kong Exchanges and Clearing Ltd. decreased 1.9% to HK $227.40 despite the company reporting increase in profit for the first time in three quarters. 

Revenue in the June quarter increased 8% from a year ago to HK $5.4 billion and net income advanced to 9% to HK $3.16 billion, following a rebound in initial public offering and in trading activities.