Hong Kong stocks cap second weekly loss on China property woes and slowdown concerns; Country Garden turns into penny stock

Chinese developers drag Hang Seng Index lower after Country Garden forecasts first-half loss of as much as US$7.6 billion and closes below HK$1 for first time

Alibaba bucks broader decline in tech stocks after posting stellar quarterly results

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Hong Kong stocks were headed for a second week of losses on Friday. Photo: EPA-EFE

Published: 10:25am, 11 Aug 2023Updated: 4:32pm, 11 Aug 2023

Hong Kong stocks completed a second week of losses on concerns the downturn in China’s property market will persist and the slowdown in economic growth will deepen.

The Hang Seng Index fell 0.9 per cent to 19,075.19 at the close. The benchmark finished the week with a 2.4 per cent decline, extending a 1.9 per cent drop in the previous five-day period. The Hang Seng Tech Index dropped 2.4 per cent, while the Shanghai Composite Index retreated 2 per cent, its steepest decline since October 28.

Country Garden Holdings tumbled to close below HK$1 for the first time since its 2007 listing after the Chinese property developer forecast a huge loss for the first half. MTR, the city’s subway operator, dropped after first-half results trailed projections. Alibaba Group Holding bucked the decline on the broader market after revenue for the quarter ended June increased by the most in a year and profit beat estimates.

“Investors are still awaiting detailed policy measures and implementations, especially amid Country Garden’s missing bond payments and continued weakness in property sales,” said Goldman Sachs in a research note. “We expect policymakers to roll out modest easing measures with a combination of monetary, fiscal, property and consumption support in the coming months.”

Lack of conviction about more forceful supportive measures has sidelined investors, who are disappointed by the absence of follow-up stimulus after a July Politburo meeting chaired by Party chief Xi Jinping hinted at a more dovish tone on spurring growth. Concerns about a deteriorating growth outlook have intensified after the latest data showed that exports declined by the most in three years last month and both consumer and producer prices slid into deflationary territory.

Country Garden, the Foshan-based home builder, slumped 5.8 per cent to HK$0.98 after saying that it expects to post a loss of between 45 billion yuan (US$6.2 billion) and 55 billion yuan because of impairment on property projects and shrinking margins.

Its property-management affiliate Country Garden Services Holdings lost 2.5 per cent to HK$7.46 and Longfor Group Holdings fell 1.2 per cent to HK$17.48. Fantasia Holdings Group tumbled 55 per cent to HK$0.090 as trading in the stock resumed after being suspended since April 1, 2022.