Hong Kong stocks slide on Alibaba Health’s profit warning while Chinese developers tumble amid debt default concerns

Alibaba Health likely swung to a net loss in the first-half to September, while BYD advanced on approval for a plan to spin off chipmaking unit

Developers continued to drag the market on concerns about debt default after Modern Land (China) reneged on a dollar bond repayment

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A woman walks past a bank's electronic board showing the Hang Seng Index on October 25. Photo: AP

Published: 10:59am, 26 Oct 2021Updated: 4:49pm, 26 Oct 2021

Hong Kong stocks declined for the first time in three days as investors looked to signals in the ongoing earnings season to gauge the strength of economic recovery from the pandemic.

The Hang Seng Index dropped 0.4 per cent to 26,038.27 at the close on Tuesday, retreating from near a six-week high. The Hang Seng Tech Index fell for a second day, losing 1.3 per cent. The Shanghai Composite Index slipped 0.3 per cent.

Alibaba Health Information said business swung to a loss in the first half and mainland developers extended losses on concern about a contagion risk after Modern Land (China) defaulted an offshore bond. BYD, the Chinese electric car maker backed by Warren Buffett, advanced on approval for a spin-off plan.

Caution prevailed before third-quarter earnings reports from some of the biggest Hang Seng stocks. Twelve of the 60 members are expected to report in the following week, including pork processor WH Group’s results on Tuesday. The index members probably posted a 2.4 per cent decline on average, according to Bloomberg data.

“Rising commodity prices, the regulatory crackdown and the expectations about the tapering in the US have weakened investors’ expectations for earnings,” HSBC Jintrust Fund Management said in a report. “But looking to 2022, all these factors will probably recede and Hong Kong stocks might already be building a bottom in the fourth quarter.”