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Hong Kong stocks sink in week on property developer defaults, while losses in HSBC and Alibaba unnerve investors
- Kaisa’s liquidity woes reignited concerns about hidden debt among Chinese developers after it missed a payment on shadow-banking product
- An outbreak in Delta cases in mainland China has led to stricter lockdowns, clouding the economic outlook
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Hong Kong stocks fell to a one-month low on heightened concerns about widening debt defaults among Chinese developers. A resurgence of the Delta variant in China has led to stricter lockdowns, clouding economic outlook.
The Hang Seng Index tumbled 1.4 per cent to 24,870.51 at the end of Friday trading, the lowest level since October 8. The index lost 2 per cent this week, following a 2.9 per cent plunge in the preceding week. China‘s Shanghai Composite Index declined 1 per cent.
Property developers Country Garden fell 2.7 per cent while Longfor Group and China Overseas Land declined at least 1 per cent. Evergrande slid 2.5 per cent to HK$2.30, while shares of Kaisa Group were halted from trading after the Shenzhen-based developer missed a payment on some of the 12.7 billion yuan (US$2 billion) of so-called wealth management products.
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Debt concerns revived after Kaisa sought more time to come up with a solution and authorities are said to have summoned the firm for a lecture. The latest episode ended six years of relative calm since the firm became the first Chinese developer to default on a dollar-denominated bond in 2015.
This added to a string of defaulters after China’s “three red lines” deleveraging campaign shut many out of the loan market. While China Evergrande has struggled to restructure its US$305 billion liabilities, others including Fantasia Holdings and Modern Land have reneged on their offshore borrowings.
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