Stocks head for corrections amid rising yields and lofty valuations

Finance | Winnie Lee and Bloomberg 9 Mar 2021

Mainland and Hong Kong stocks slumped yesterday on fresh pressure from rising Treasury yields and tech stocks with lofty valuations, with China's main stock benchmark entering a correction yesterday.

In Hong Kong, the benchmark Hang Seng Index fell 557 points or 1.92 percent to 28,540 yesterday, as mainboard turnover hit HK$276.78 billion.

Net southbound sales was HK$13.18 billion, the highest since February 24. Hang Seng Index futures remained steady at 28,500 as of 7pm.

Among blue chips, WuXi Biologics (2269) was the worst performer, plunging 9.66 percent to HK$88.85, while the best performer was BOC Hong Kong (2388) rising 4.46 percent to a one-year high of HK$28.10.

The Hang Seng Tech Index plunged 6.4 percent to 8,081 points.

Xiaomi (1810) fell 8.59 percent to HK$22.35 as a Wall Street Journal report revealed that the phone maker was blacklisted as a company with military ties partly due to an award given to its founder, Lei Jun, for his service to the state back in 2019. Meanwhile, S&P Dow Jones said it will remove Xiaomi before March 15 while the FTSE Russell will kick out the phone maker from Global Equity Index Series on March 12. (9618) was down 5.93 percent to HK$336.2 after its JD Tech was said to give up a plan to list on Shanghai's Star market.

Tencent (0700) fell 5.4 percent while Kuaishou (1024) hit a new low, falling 6.67 percent to HK$266.

Utility shares rose as capital flowed into them as Power Assets (0006) rose over 3.01 percent to HK$44.45.

Oil prices slipped after climbing above US$70 (HK$546) a barrel for the first time since the Covid-19 pandemic began, and PetroChina (0857) rose 4.1 percent. China Petroleum & Chemical (0386) grew 1.37 percent. CNOOC (0883) rose 2.04 percent.

Mainland banks outperformed with Industrial and Commercial Bank of China (1398) up 1.65 percent, hitting an over-one-year high. HSBC (0005) rose 3.58 percent and Standard Chartered (2888) was up 4.06 percent.

In mainland China, the Shanghai Stock Exchange Composite Index dropped 2.3 percent at 3,421 points, and the Shenzhen Stock Exchange Composite Index fell by 3.24 percent to 2,224 points.

The CSI 300 Index fell 3.5 percent, piercing through its 100-day moving average and putting losses from its recent February 10 peak to 13 percent. The correction comes just 13 days after the gauge closed at its highest level since 2007 before the market paused for the Lunar New Year holiday.

The onshore yuan also slumped, falling 465 pips to 6.5233 per US dollar, and the 10-year US Treasury yield topped 1.6 percent, after the Senate passed a US$1.9 trillion (HK$14.82 trillion) coronavirus stimulus bill on Saturday.

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