Hong Kong stocks erase losses as developers rebound amid Evergrande debt concerns while Chinese tech firms struggle

Some Chinese developers are taking steps to ease liquidity pressure while Macau casino stocks regain further footing
Evergrande’s crisis looms large over the market as Citigroup listed lenders with high exposure to mainland property sector

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Cheryl Heng

Published: 11:05am, 21 Sep, 2021

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Hong Kong stocks climbed from near a one-year low as the city’s biggest developers and Macau casino operators advanced, sidestepping concerns about a wider fallout from China Evergrande’s debt crisis.

The Hang Seng Index gained 0.5 per cent to 24,221.54 at the close of Tuesday trading. The benchmark slumped 3.3 per cent on Monday to the lowest level since October 2020 amid a sell-off on homebuilders. The Hang Seng Tech Index pared a decline to 0.5 per cent from 1.4 per cent. Markets in mainland China were shut for the Mid-Autumn holiday.

Gains in developers calmed the market as some firms unveiled efforts to raise cash to repay creditors. Guangzhou R&F Properties surged 12 per cent to HK$4.81 after proposing to sell assets to Country Garden for 10 billion yuan (US$1.54 billion). Two of its major shareholders also agreed to lend the firm HK$8 billion (US$1.03 billion).

Country Garden added 8.9 per cent to HK$7.13. Fantasia added 3.9 per cent to HK$0.53 after saying it has enough cash to repay bondholders next month.

“Against the market view, we see regulators keeping a close eye on Evergrande and think it could soon put forward a plan or meaningful progress to reduce the impact,” analysts at Jefferies said in a note to clients. “Marginal loosening on the mortgage quota is possible, which will help property sales and ease their cash flow tightening.”

The Hang Seng Property Index rose from a five-year low. The gauge plunged 6.7 per cent on Monday amid concerns Beijing will next target the city’s richest landlords to help fix the housing shortage. CK Asset Holdings jumped 4.1 per cent to HK$43.55. Sun Hung Kai Properties and New World Development both gained 1.7 per cent.

Financial stocks earlier fell as traders took precaution, with Ping An Insurance falling 4.2 per cent to HK$49.20 and Bank of China (Hong Kong) tumbling 2.6 per cent to HK$22.45. S&P Global Ratings said Evergrande was on the verge of reneging on its debt.

China debt: Evergrande’s magnate Hui Ka-yan and Chinese Estates’ founder Joseph Lau through the years

“Evergrande’s default crunch and its contagion impact present a potential systemic risk to China‘s financial system,” Citigroup analysts Judy Zhang said in a report to clients on Tuesday. About 41 per cent of the banking system assets was either directly or indirectly associated with the property sector as of end 2020, they added.

02:28

Angry protest at headquarters of China Evergrande as property giant faces liquidity crunch

Evergrande fell 0.4 per cent to HK$2.27 as investors await its plan to reorganise more than US$300 billion of liabilities after the firm last week hired outside financial advisers to tackle its debt burden. Citigroup mentioned Minsheng Bank, Ping An Bank and China Everbright Bank as lenders with the highest credit risks to the property sector.

Chinese tech stocks also struggled, with Alibaba Group Holding, the owner of this newspaper, losing 1.8 per cent. Tencent Holdings, a favourite bet among mainland funds through Stock Connect, lost about 1 per cent as the Southbound Connect remained shut for a holiday.

Elsewhere, MGM China, Wynn Macau and Sands China all rallied by more than 4 per cent as concerns about tightening regulations in the gambling hub eased.

Markets in the Asia-Pacific region were mixed before the Federal Reserve meeting to decide on rate policy on Wednesday. Japanese stocks slumped 2.2 per cent while benchmarks in South Korea and Australia gained by more than 0.3 per cent.

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