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
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.
Foreign investors have sold 51.6 billion yuan (US$7.1 billion) of yuan-denominated stocks so far in August, according to Bloomberg data, approaching the 57 billion yuan net-selling seen in October last year just before China ended its zero-Covid policy.
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Losses this week mounted amid worries about corporate earnings, following weaker results from industry leaders including Lenovo and CNOOC. About 30 Hang Seng Index members have published their first-half results todate, averaging 3.7 per cent growth in profit. The index members delivered a 5.5 per cent profit gain in 2022.
Three companies debuted on Friday. Suzhou Convert Semiconductor surged 109 per cent to 85.50 yuan in Shanghai and Weima Agricultural Machinery jumped 156 per cent to 75.50 yuan in Shenzhen. Hubei Hongyu New Packaging Materials gained 9.6 per cent to 8.77 yuan in Beijing.
Other major Asian markets traded lower. Japan’s Nikkei 225 slipped 0.6 per cent, while South Korea’s Kospi also retreated 0.6 per cent and Australia’s S&P/ASX 200 added less than 0.1 per cent.
