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Tech haunts Hong Kong’s stocks as earnings start to fall short

A rout in technology stocks has punished the Hang Seng Index this year, tipping it into a bear market in September.

Earnings jitters hit shares in Hong Kong after several Chinese tech companies reported worse-than-expected results.

The Hang Seng Index slid 2.5% as of 2:09 p.m. local time, headed for its steepest drop in more than two weeks. All 50 of its members declined, with technology shares tracking overnight losses for Chinese stocks listed in the US Tencent Holdings slid 4.2% ahead of next week’s quarterly report, while AAC Technologies Holding was poised for its worst week since 2009 as brokers downgraded the stock after disappointing results. Sunny Optical Technology Group fell 3.3%.

Stocks in Hong Kong resumed their declines after a short squeeze caught bears off guard last week. A rout in technology stocks has punished the Hang Seng Index this year, tipping it into a bear market in September. The gauge has just come off its longest streak of monthly losses in 36 years. Analysts have trimmed their earnings expectations for this year, predicting a contraction for members of the gauge on average.

“Concerns about an earnings slowdown are rising in China markets after AAC Technologies missed estimates,” said Castor Pang, head of research at Core Pacific-Yamaichi in Hong Kong. “There have been a few downgrades on the smartphone makers and earnings worries are spilling over to Tencent. It’s hurting sentiment for the whole market.”

AAC dropped 5.5%, headed for a 21% tumble for the week as its third-quarter results prompted analyst downgrades. Tencent was poised for its biggest drop in more than two weeks, while Sunny Optical was in line for a five-day loss of 12%.

Shares also slipped in mainland China, where the Shanghai Composite Index retreated 1.4% and the Shenzhen Composite Index fell 0.4%. Financial companies led declines on the CSI 300 Index after the banking regulator set lending targets for private companies.

Among other stocks moving on Friday:

Dongfeng Motor and Guangzhou Automobile were among the worst performers on the Hang Seng China gauge after car sales in China declined for a fifth consecutive month. Macau casinos extended declines after Melco Resorts’ results missed the lowest analyst estimates and US-listed Wynn Resorts tumbled overnight; Galaxy -4.4%, Sands China -4%. Energy companies fall as oil trades near record losing streak after entering a bear market; Cnooc -4.2%, PetroChina -2.6%. Banks dragged the Hang Seng Index lower, with Industrial & Commercial Bank of China falling 3.1% and China Construction Bank losing 2.6%; China Merchants Bank and Bank of Shanghai fell at least 5% onshore to lead declines on the CSI 300 financials subgauge.

© 2018 Bloomberg L.P

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