Hang Seng ends 1.4pc lower on sharp declines by property developers

China Evergrande down 8.8pc; Sunac China down 7.5pc; China Vanke down 8.0pc, as Chongqing and provincial capital cities announce more market-cooling measures. The Hang Seng property index slumps 2.49pc, its biggest loss since November 2016

PUBLISHED : Monday, 25 September, 2017, 9:07am
UPDATED : Monday, 25 September, 2017, 11:12pm

Hong Kong stocks fell on Monday as property developers dropped after eight large Chinese cities imposed more restrictions on home resales, in an effort to rein in home prices.

The Hang Seng Index slid 1.4 per cent, or 380.19 points, to 27,500.34, lowest since September 6, and extending a 0.8 per cent slide last Friday after S&P Global Ratings downgraded the city and China’s credit ratings in two separate moves. The Hang Seng China Enterprises Index, or the H-share gauge, lost 1.8 per cent to 10,912.46. Mainland equities also fell.

The Hang Seng property index slumped 2.49 per cent, its biggest loss since November 2016 after Chongqing and provincial capital cities including Changsha and Shijiazhuang announced market cooling measures last week that include restrictions on home flipping by banning the resale of properties from periods ranging between two to five years.

The uptrend on Chinese developers will very probably be reversed here
Wang Zheng, Jingxi’s Shanghai-based chief investment officer

Shenwan Hongyuan lowered its recommendation on the property sector to underweight and Jingxi Investment Management said the tightening measures may end a rally on the Hang Seng property gauge that rose 33 per cent through Friday this year.

“The measures will definitely put lots of potential buyers on the sidelines and affect developers’ sales,” said Wang Zheng, Jingxi’s Shanghai-based chief investment officer. “The uptrend on Chinese developers will very probably be reversed here.”

China Evergrande tumbled 8.8 per cent to HK$26.9 and Sunac China shed 7.5 per cent to HK$32.00. The two stocks have jumped at least fivefold this year. Beijing Capital Land retreated 10.4 per cent to HK$4.24. China Vanke slid 8.0 per cent to HK$24.8.

AAC Technologies Holdings, which relies on Apple for 47 per cent of it sales, lost 6.7 per cent to HK$127.5 on concern sales of new models of iPhones, which began this month, will trail estimates. Turnout for the iPhone 8 launch in Asia last week was muted, with fewer people than usual lining up in front of many Apple stones, including those in Hong Kong and China.

China tiered city system

The latest bans on home re-sales, mostly in China’s second-tier cities, may indicate a new round of all-out property tightening from the central government, and more cities are likely to follow suit, said Liu Hong, an analyst from Shenwan Hongyuan. Li recommends selling property stocks, particularly shares of Sunac China and Guangzhou R&F Properties.

Currently, about 40 cities have implemented similar cooling measures, according to the Shanghai-based brokerage.

In mainland trading, the Shanghai Composite Index fell 0.3 per cent, or 10.98 points, to 3,341.55. The CSI 300 Index of big companies also dropped 0.5 per cent.

Developers listed in China also led the declines. Sunshine City Group tumbled 9.4 per cent to 7.06 yuan and Future Land Holdings slumped 6.5 per cent to 18.34 yuan.

Shanghai Highly Group, a maker of fridge compressors, surged by the 10 per cent daily limit to 16.27 yuan as the stock resumed trading after being suspended over the past two days. Gree Electric Appliances has recently boosted its stake in the company to 5 per cent, according to earlier exchange statements.