Hang Seng Nears Correction as Vaccination Halt Worsens Selloff By Bloomberg

(Bloomberg) — Hong Kong’s benchmark stock gauge extended its losses from a recent peak to 10%, set to enter a technical correction, as the city’s temporary suspension of BioNtech vaccinations fueled worries over the pace of its recovery from the pandemic.

The lost as much as 2.1% amid a broad selloff in Asia on Wednesday. Stocks in the commerce and industry sector as well as financials were the biggest losers on the gauge, with AIA Group (OTC:) Ltd. — with the second-highest weighting — contributing the most to losses.

The Hang Seng’s slide from its Feb. 17 peak comes as traders rush to sell pricey stocks due to worries over rising bond yields. As one of Asia’s largest and most open equity markets, Hong Kong is particularly sensitive to shifts in global liquidity. China’s CSI 300 Index entered a technical correction earlier this month on concerns about lofty valuations and potential liquidity tightening.

“The vaccination process will be slower than expected, resulting in a slower-than-expected recovery of the local economy,” said Steven Leung, executive director at at UOB Kay Hian (Hong Kong) Ltd. “Also, traders are still worrying about liquidity. Rising bond yield in the U.S. and limited measures by China’s central bank to boost liquidity remain as big overhangs to the market.”

Hong Kong and Macau temporarily suspended Covid vaccines manufactured by BioNTech SE (NASDAQ:) because of a packaging defect. That marks the latest setback for Hong Kong’s vaccine rollout, which has been slowed by public distrust in the Beijing-backed government.

READ: Hong Kong, Macau Suspend BioNTech Vaccines on Packaging (NYSE:) Defect

Earnings Focus

Rising volatility and concerns about tighter liquidity are also starting to impact investor appetite for the Hong Kong’s IPOs and new listings that were in hot demand last year, with the days of the massive first-day pops likely nearing an end.

The HSI’s move on Wednesday formed a worrying signal to technical chart watchers as the index breached the neckline of a so-called bearish head-and-shoulders pattern, implying further downside.

Wednesday’s selloff comes as investors await earnings from Internet giant Tencent Holdings (OTC:) Ltd., which has the highest weighting on the HSI gauge.

“Hong Kong stocks are more swung by U.S. Treasuries and A-shares for now,” said Tracy Chan, an analyst at KGI Asia. “Investors are cautious ahead of Tencent earnings. Any in-line or missed earnings would trigger selling pressures.”

Geely Automobile Holdings (OTC:) Ltd. was the biggest loser on the HSI index, losing as much as 14% in a second day of declines. China’s biggest maker of local, branded cars on Tuesday posted a worse-than-expected drop in earnings for 2020. Shares of Macau casino operators were also among the worst performers following the vaccination halt.

©2021 Bloomberg L.P.