The Hang Seng Index fell 1.3 per cent to 18,230.19 at the close for a third straight day of losses. The Hang Seng Tech Index dropped 0.3 per cent and the Shanghai Composite Index slipped 0.6 per cent.
Tepid investor demand at a US Treasury auction fuelled supply and deficit concerns driving up bond yields, reducing the appeal of riskier equities. Japan’s Nikkei 225 slid 1.3 per cent, while South Korea’s Kospi retreated 1.6 per cent and Australia’s S&P/ASX 200 lost 0.5 per cent.
Hong Kong stocks are seeking fresh catalysts after entering bull market territory following a 20 per cent gain from a January low. Investors are now tracking the effect of relaxation measures in China’s embattled property market after first-tier cities, including Shanghai and Guangzhou, removed some of the curbs on house purchases this week. Sentiment will also be driven by the trend in corporate earnings.
“The recent volatile swings in Hong Kong stocks are due to crowded trading and slowing capital inflows,” said Wang Yang, an analyst at Zheshang Securities. “Earnings are still the key that will sway the market. But for now, there’s no change of expectations for earnings for Hong Kong-listed companies.”
Gold producer Zijin Mining Group tumbled 5.5 per cent to HK$16.98 as gains in bullion prices stumbled amid reduced expectations for an interest-rate cut by the Federal Reserve. Chinese property developer Longfor Group Holdings dropped 3.6 per cent to HK$12.72 and peer China Resources Land sank 3.2 per cent to HK$29.10. Alibaba Group Holding lost 0.7 per cent to HK$76.30 and Tencent Holdings fell 0.8 per cent to HK$368.
Bucking the loss in the broad market, Semiconductor Manufacturing International Corp climbed 4.9 per cent to HK$16.84 and Hua Hong Semiconductor advanced 4 per cent to HK$20.15. The outperformance was driven by the headline that China launched a state chip fund to fulfil its tech self-reliance strategy.
The breadth of earnings for Chinese companies, which measures the ratio of companies with earnings upgrades, has started to improve from low levels, according to Societe Generale. Margins remain a key driver of the earnings recovery as revenue growth is still sluggish and that growth now appears to be broadening beyond the discretionary and communication sectors to investment sectors, although consumer sectors should likely retain the leadership, it said in a research note on Wednesday.
Investors await the release of China’s official purchasing managers’ index (PMI) of the manufacturing industry which is due on Friday. The gauge is expected to rise to 50.5 in May, remaining above the expansionary zone for a third month, according to consensus estimates by the economists polled by Bloomberg.
Elsewhere, Jiangsu Wanda Special Bearing jumped more than 200 per cent from its initial public offering price to 67.98 yuan on its trading debut in Beijing.