(Bloomberg) — Earnings worries fueled a downward spiral of stocks in Hong Kong on Friday, after the nation’s e-commerce giant Alibaba Group Holding Ltd. reported disappointing results.
The Hang Seng Index dropped as much as 1.9%, the most in two weeks. Alibaba slumped more than 10%, spurring losses in Meituan and Tencent Holdings Ltd. Also weighing on the benchmark was property management firm Country Garden Services Holdings Co. It plunged 17% to be the worst performer after raising $1 billion in a share placement.
Alibaba is the latest technology company that has missed estimates in this earnings season, after online gaming giant Tencent’s revenue came below estimates last week. Among the 16 companies that have reported quarterly earnings on the Hang Seng Tech Index, seven have fallen behind market expectations, Bloomberg-compiled data show.
Alibaba’s results “reminded investors that the golden time of Chinese technology companies is likely behind,” said Castor Pang, head of research at Core Pacific-Yamaichi International Hong Kong Ltd. “Now they have to deal with longer-than-expected earnings impact from tightened regulations and a slowing Chinese economy.”
READ: Alibaba Shares Slump After ‘Underwhelming’ Results: Street Wrap
Still, investors are rewarding firms that could still deliver positive earnings surprises amid a challenging macro environment. JD.com Inc., a major rival of Alibaba, saw its shares jumping as much as 6.8% in Hong Kong to the highest in eight months, after announcing its third quarter revenue that beat analyst forecasts.
JD.com’s gain helped offset some losses in the Hang Seng Tech Index, which tracks mostly Chinese online titans. The measure pared declines to 1.3% as of 11:29 a.m. local time after falling 2.1% in early morning trading.
READ: China Stocks in U.S. Slide as Alibaba Adds to Earnings Woes (1)
Morgan Stanley strategist Laura Wang warned on Thursday that Chinese companies are facing the worst earnings season since 2018, while downward revisions by analysts to profit views will likely extend through the end of this year.
(Updates throughout.)
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