Hong Kong stock rally halted as Apple suppliers tumble on earnings risk, US election jitters

Yujing Liu
·4-min read

Hong Kong and China stocks plunged on Friday after a choppy session, taking benchmarks on both sides of the border to weekly losses. Concerns over the latest round of earnings from technology giants mounted after Apple missed its sales estimates last quarter, slamming its suppliers.

The Hang Seng Index plummeted 2 per cent at the close of trading to 24,107.42 in its worst day since October 15. The 3.3 per cent drop for the week was the gauge’s first weekly decline in five.

The Shanghai Composite Index swung between gains and losses, before diving in late trading for a 1.5 per cent drop to 3,224.53. The gauge slid 1.6 per cent from Monday, capping a second weekly setback. The Shenzhen Component Index declined 2.1 per cent.

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A sell-off in technology stocks deepened in the afternoon after US stocks futures opened much lower as global investors digested Apple’s iPhone sales miss, rising global coronavirus infections and concerns that the US presidential election outcome. Chinese fintech behemoth Ant Group’s initial public offering also drained market liquidity.

“There’s a degree of uncertainty weighing on the market, including the deteriorating global pandemic and the US election,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai. “The fact that Ant’s IPO soaked up so much liquidity also magnified the pressure to sell on any negative news.”

Apple’s stock plunged 4.2 per cent on Nasdaq in after-hour trading, after reporting a 21 per cent slide in third-quarter iPhone sales in anticipation of the new line-up of 5G model. The decline was worse than what the market expected, inducing steep losses in shares of its suppliers in Hong Kong and mainland China.

AAC Technologies Holdings, a maker of acoustic components, dropped 2.7 per cent to HK$40.85. Sunny Optical Technology Group, which is expected to supply lenses to the iPhone maker, fell 1.3 per cent to HK$128.20. GoerTek Inc, which assembles the AirPods wireless earbuds, lost 6.3 per cent to 45.36 yuan in Shenzhen. Luxshare Precision Industry dived 6.1 per cent to 54.86 yuan.

Internet giants also dropped in Hong Kong after a recent run-up put sentiment and valuations in focus. Tencent Holdings, which is set to announce third-quarter results on November 12, fell 2.3 per cent to HK$591 from a record-high. Alibaba Group, the owner of this newspaper, declined 3.1 per cent to HK$293.20, while online food delivery group Meituan Dianping retreated 3 per cent at HK$288.20 also from a record-high.

“This is likely to be just a short-term correction in tech stocks ahead of their earnings releases,” said Gordon Tsui, chairman of the Hong Kong Securities Association. “The long-term momentum for these new economy stocks are still very strong, though, given their growth in the post-pandemic era.”

Meanwhile, Ant Group has attracted a record number of bids and subscription money in the retail portion of the Hong Kong taking orders from retail investors, having soaked up more liquidity from the market as strong demand triggered an increase in allocation at the expense of institutional investors.

The IPO will raise US$39.67 billion including overallotment, making it the largest private company to go public ever. It priced its retail portion in Hong Kong at HK$80 each.

The world’s largest stock sale by Ant draws a record US$167.7 billion from more than 1.4 million retail investors, people say

Two property management firms had a week performance their trading debut in Hong Kong. Shimao Services plunged by as much as 9.3 per cent before closing unchanged from its offering price of HK$16.60. KWG Living Group plunged 22.9 per cent to HK$6.08.

Skymission Group Holdings, a Hong Kong construction work subcontractor, tumbled 92.1 per cent to HK$0.197 for unspecified reason. The stock skyrocketed 186 per cent from its offering price of HK$0.35 on its first trading day on August 29.

Chinese smartphone and home appliances maker Xiaomi bucked the market and advanced 0.9 per cent to HK$22, after data from global market research firm Canalys shows phone shipment jumped 45 per cent in the third quarter from a year earlier. Xiaomi ranked the third in the quarter after Samsung and Huawei Technologies.

Semiconductor companies advanced broadly on optimism that hostility from the US towards the sector is moderating, following a Financial Times report that the US is allowing more chip companies to supply Huawei with components for non-5G business uses. Semiconductor Manufacturing International Corp, China’s largest chip maker, gained 3.4 per cent to HK$22.75, recouping all the losses since September 7 when its shares plunged on US sanctions.

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