Jimmy Lai’s Next Digital swings wildly as Hong Kong, China stocks retreat amid caution over market rebound

The Next Digital stock surged by as much as 45 per cent in late afternoon trading after plunging by as much as 17.7 per cent earlier in the day. It closed 36.7 per cent higher at HK$0.41 on Thursday. Photo: Bloomberg

The markets in Hong Kong and China swung to declines at the close on Thursday, with caution about a market rebound prevailing over early optimism over recent and upcoming initial public offerings (IPOs) and gains made by US stocks overnight.

The Hang Seng Index dropped 0.6 per cent to 24,313.54, while the Shanghai Composite Index also ended the day 0.6 per cent lower at 3,234.82.

In Hong Kong, financial stocks led the declines. The Industrial and Commercial Bank of China and insurer AIA Group shed 1.6 per cent and 1.4 per cent, respectively.

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Jimmy Lai Chee-ying’s Next Digital swung significantly during the day after the South China Morning Post reported that Hong Kong police had arrested 15 people on suspicion of manipulating its stock following Lai’s arrest last month. Next Digital shares soared by as much as 1,200 per cent following the arrest.

The stock surged by as much as 45 per cent in late afternoon trading after plunging by as much as 17.7 per cent earlier in the day. It closed 36.7 per cent higher at HK$0.41 on Thursday.

Meanwhile, the technology sector was mixed – while benchmark heavyweight Tencent Holdings and smartphone maker Xiaomi led the gains among Hang Seng Index constituents, rising by 2.5 per cent and 1.6 per cent, respectively, the Hang Seng Tech Index lost 0.2 per cent. Hua Hong Semiconductor dropped by about 10 per cent and ZTE Corporation was down 4.2 per cent.

“Last night, (Wall Street) recorded a strong rebound, but that just applies to the US,” said Louis Tse Ming-kwong, managing director of VC Asset Management. “As far as Hong Kong is concerned, we have had two days of heavy selling. In fact, a correction in Hong Kong technology stocks has been overdue for quite some time,” he said, adding that the correction might continue especially when the Hong Kong market also track stock movements on the mainland.

Stocks on Wall Street recorded strong gains on Wednesday. The Nasdaq recovered from a 10 per cent decline since September 2 to gain 2.7 per cent, while the Dow Jones Industrial Average rose 1.6 per cent. The S&P 500 was also up, having risen 2 per cent.

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“The rebound rally continues to suggest that investors remain confident about the economic prospects where a virus vaccine still provides a pillar of support, albeit with some dents in the armour,” Stephen Innes, chief global markets strategist at AxiCorp, said in a note on Thursday.

Meanwhile, Nongfu Spring’s shares rose 8.1 per cent to HK$35.9 on Thursday, after index compiler Hang Seng Index Company said late on Wednesday that the Chinese bottled water giant will be added to the Hang Seng Composite Index from September 22.

Yum China Holdings, the operator of KFC, Pizza Hut and Taco Bell restaurants in mainland China, however, dropped 5.3 per cent on its debut in Hong Kong on Thursday. It is the restaurant chain’s secondary listing.

On the mainland, low-priced technology stocks listed on the ChiNext technology board led the declines. SMIC, China’s top semiconductor maker, in the news recently after the Trump Administration said it was considering blacklisting the company, shed 2.5 per cent. An index compiled by Wind Information that tracks low-priced technology stocks plunged as well, falling 15.6 per cent on Thursday.

“Active trading was concentrated in low-price stocks previously, but market sentiment soured after the government condemned speculation on these stocks,” said Yan Kaiwen, analyst at China Fortune Securities.

The Shenzhen Composite Index on Wednesday suspended trading in three small companies whose prices had skyrocketed, after Chinese state media said speculation on poorly performing small companies should be curbed.

Elsewhere, Kweichow Moutai, the world’s most valuable liquor stock, rose 1.1 per cent, but airlines stocks, which had risen on Wednesday, reversed to declines, with Hainan Airlines Holding falling by 8.6 per cent.

The Shanghai Composite was, however, not expected to decline too much after this and was expected to rebound to a level near 3,180, China Fortune Securities’ Yan said. He added that China’s economic recovery and the increased profitability of its companies will support stocks.

Ant Group’s mainland China IPO gathered pace on Thursday, after Shanghai’s stock exchange said that it would review its listing application on September 18. The largest digital payments provider and digital finance platform by volume in China, Ant has filed for dual listings on the Star Market and in Hong Kong, and could be in line for the largest fundraising in history.

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

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