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
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.”
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.
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.