Hong Kong stocks sink on tech, developers fallout while Evergrande roils market as mainland funds take a breather

Tech losses and China Evergrande’s free-fall underscore rising concerns among investors about credit risks
Mid-Autumn holiday deprived Hong Kong market of buying support from mainland funds as the Stock Connect link is closed for three days

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Cheryl Heng

Published: 10:55am, 20 Sep, 2021

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Hong Kong stocks sank to the lowest in about a year as China Evergrande Group’s free-fall stoked concerns about credit risks among indebted developers and Chinese officials failed to calm investors about tech sector clampdown.

The Hang Seng Index slumped as much as 4.2 per cent to 23,871.84, a level not seen since early October last year. The index ended Monday trading with a 3.3 per cent loss, the most since a 4.2 per cent crash on July 27. All but three of the 60 index members declined. The benchmark has lost 16.4 per cent since June 30, set for the worst quarter so far in six years.

The Hang Seng Property sub-index tumbled 6.7 per cent to the lowest level in more than five years as Henderson Land, New World Development and Sun Hung Kai Property led losses amid speculation Beijing will next trample on their businesses. More than US$11 billion was erased from the market value of the city’s six biggest landlords.

The local market weakened as a public holiday in China deprived it of the buying support from mainland funds. The Stock Connect’s southbound trading link with Hong Kong will be shut over the next three days due the Mid-Autumn Festival, according to exchange data.

“Stock market liquidity is likely to be sluggish” because of the holiday effect, KGI Securities said in a research note on Monday. “Concerns [about] Evergrande debt problem depressed China property and property management sector. “Short term sentiment remained weak.”

Tencent slipped 1.7 per cent to HK$454.20, carmaker BYD lost 5.3 per cent to HK$248.30 and Meituan retreated 2.6 per cent to HK$234.60.

Henderson Land, Sun Hung Kai and New World Development plunged by at least 10 per cent. Chinese officials told local property tycoons to pour their resources and influence to back Beijing’s interests and help solve the city’s housing shortage, Reuters reported over the weekend.

Evergrande’s staunchest allies drop out as developer’s creditworthiness weakens

China Evergrande sank 10 per cent to HK$2.28 taking its six-day losing streak to 37 per cent. The developer on the weekend offered its properties at discounted prices to repay creditors, after hiring outside advisers to tackle its debt burden.

Guangzhou R&F Properties and Fantasia Holdings both tumbled 7.3 per cent after their rating outlooks were cut last week amid concerns about their liquidity.

China’s top regulators defended their market-roiling crackdown on various industries in a meeting with Wall Street executives, while reassuring them the stricter rules are not aimed at stifling technology companies or the private sector, according to a Bloomberg report.

Japan and South Korea’s markets were shut for holiday, while Australian stocks weakened as shares of major miners slumped. Markets were generally wary ahead of a Federal Reserve meeting this week amid tapering concerns.