Hong Kong stocks slide in pivotal week for China stimulus bets while developers sink on liquidity, rate outlook

The Hang Seng Index approached a two-week low on concerns China stimulus will disappoint while the Fed are odds-on to tighten its policy this week

Foreign investors dumped US$1 billion worth of onshore stocks last week while mainland funds wavered on their purchases in Hong Kong

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A homebuyer walking through a construction area in the compound where he bought an apartment in Ningbo, eastern Zhejiang province on June 2. Photo: AFP

Published: 10:23am, 24 Jul 2023Updated: 4:40pm, 24 Jul 2023

Hong Kong stocks slumped amid signs foreign investors are trimming their bets on China’s biggest companies as Beijing holds off big stimulus while the economy deteriorates. Property developers retreated on dimmer sales outlook as central banks prepare to raise interest rates again.

The Hang Seng Index dropped 2.1 per cent to 18,668.15 at the close of Monday trading, approaching a two-week low. The benchmark declined 1.7 per cent last week. The Tech Index lost 2.2 per cent, while the Shanghai Composite Index advanced 0.1 per cent.

Alibaba Group lost 1.8 per cent to HK$89.65 and Tencent tumbled 2.4 per cent to HK$325 while NetEase declined 1.2 per cent to HK$158.20. Developer Country Garden slumped 8.7 per cent to HK$1.26 and Longfor plunged 8.3 per cent to HK$14.82. Hong Kong peer Sun Hung Kai Properties weakened 1.7 per cent to HK$95.05, and New World Development slipped 1.6 per cent to HK$18.08.

Foreign investors sold US$1 billion worth of onshore stocks last week, the most in Asian markets, according to Goldman Sachs. The pullback trimmed the inflows so far this year to US$28 billion. Mainland Chinese funds wavered in their bets, buying US$2.1 billion of stocks in Hong Kong on July 19, and sold US$1.8 billion the next day, the US bank said, citing Stock Connect data.

China’s property market has continued to struggle amid weak sales and persistent liquidity crunch. Changes in new home prices in Tier-1 mainland cities in June ranged from a 0.4 per cent gain to a 0.3 per cent drop from May, according to government data. Sales by China’s top 100 developers plunged 28 per cent in June from a year earlier, according to data compiled by China Real Estate Information Corp.

“China has launched some incremental measures but not the big package investors want to see,” said Redmond Wong, strategist at Saxo Capital Markets Hong Kong. “Targeted measures will continue, and I think the market will eventually turn around to work on that basis.”