Hong Kong stocks suffer worst weekly sell-off since March as debt defaults, yuan slide trouble investors

The Hang Seng Index weakened 5.9 per cent this week in the market’s worst sell-off since March

Weak trade data, sliding home prices and yuan depreciation stoked concerns about widening debt defaults in China’s property market and shadow banking industry

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Tourists seen walking Central, Hong Kong’s financial district, on August 11, 2023. Photo: Reuters

Published: 10:43am, 18 Aug 2023Updated: 4:43pm, 18 Aug 2023

Hong Kong stocks logged the biggest weekly loss in five months amid concerns about widening debt defaults in China’s property industry and shadow banking fallout. Investors also slashed their bets after the Chinese currency hit the weakest level since October.

The Hang Seng Index slid 2.1 per cent to 17,950.85 at the close of Friday trading, hitting the lowest level since November 28. The 5.9 per cent decline since last Friday was the most since the March 10 week. The Tech Index slumped 3.6 per cent while the Shanghai Composite Index slipped 1 per cent.

Lenovo Group slumped 5 per cent to HK$7.29 while JD Health dived 13 per cent to HK$41.15 and EV maker Xpeng tumbled 6.6 per cent to HK$61. Alibaba Group Holding slipped 3.4 per cent to HK$87 while Tencent Holdings lost 2.3 per cent to HK$325. Developer Longfor Group sank 3.8 per cent to HK$16.54, despite delivering an almost 8 per cent increase in first-half earnings.

Investors have given up on the short-term outlook for Chinese stocks by cutting their holdings after Beijing failed to follow up on its July 24’s pledge with measures to lift the economy. Weak data for July and sliding home prices have since undermined confidence and stoked default concerns following missed payments at developer Country Garden and private wealth manager Zhongrong International Trust.

“The market may test a new low as external risks build up and concerns about the strength of the economy intensify,” said Deng Lijun, an analyst at Huajin Securities in Shanghai.

The onshore yuan weakened 0.7 per cent to 7.2870 per US dollar this week, approaching its weakest level since October and prompting speculation the People’s Bank of China will intervene to strengthen its currency.