China and HK stocks drop as investors focus on earnings; CATL slumps

Hong Kong and Chinese stocks experienced a decline on Wednesday, despite a general upturn in Asian markets, as investors focused on earnings and grew concerned about the health of the consumer sector. The CSI300 Index in China fell by 0.7% by midday, while the Shanghai Composite Index dropped by 0.3%. The Hong Kong benchmark, Hang Seng, also saw a decline of 0.4%.

CATL, the top Chinese battery maker, saw its shares plummet by 10% in both Hong Kong and mainland markets after reporting slower profit growth in the third quarter. The decline was attributed to fierce competition and slower growth in China's auto sales. The weak performance of toy retailer Pop Mart also added to the risk aversion, with its shares dropping by 4% by midday, as investors anticipated disappointing third-quarter earnings.

Market participants indicated that investors were expressing their pessimistic view on China's weak domestic demand through the trading of consumer stocks ahead of the third-quarter earnings. Liquor and new energy firms led the decline, while big data and cloud operators outperformed. Investors believed that policymakers were unlikely to introduce market stimulus measures soon, as economic growth remained robust and driven by exports.

Sophie Altermatt, an economist at Julius Baer, stated in a note that the government's focus remained on technological advancement, industrial upgrading, and greater self-sufficiency, rather than seeking to boost near-term growth.