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An electronic board displays the Hang Seng Index figures at Exchange Square, the building housing the stock market, in Hong Kong. Photo: EPA-EFE
BusinessMarkets

Hong Kong stocks slide to 22-month low after market ignores China’s first rate cut in nearly two years

  • Hang Seng Index fell 1.9 per cent to 22,858.50, its lowest level since March 2020
  • Hang Seng Tech Index slipped 3.2 per cent to its lowest since its inception in July 2020, dragged down by heavyweights NetEase, JD.com, Alibaba and Tencent
China stock market
Cheryl Heng
Cheryl Heng
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Hong Kong stocks fell for a second straight session to a 22-month low led lower by Chinese property developers and technology giants. China’s first cuts to borrowing costs in nearly two years failed to halt the slide.

The Hang Seng Index retreated 1.9 per cent to 22,858.50 at the close of Monday trading, its lowest level since March 2020. China’s Shanghai Composite Index declined 1.1 per cent.

The city’s tech gauge tumbled to its lowest since its inception in July 2020. It lost 3.2 per cent, dragged down by a 4.9 per cent decline in NetEase. JD.com tumbled 4 per cent, while Alibaba and Tencent lost at least 2.1 per cent.

“Quite a bit of loss-cutting orders came into play,” said Louis Tse Ming-kwong, managing director of Wealthy Securities in Hong Kong. “Tech stocks are testing lows and [for some traders] it is time to wind up their portfolios as they expect the market to go lower.”

The Hang Seng Tech Index has retreated 8.7 per cent this month. It is on track for a fifth month of slump in six as it bears the brunt of Beijing’s regulatory crackdown. About US$637 billion of market value has been wiped out since the end of June, when Chinese authorities launched a cybersecurity probe on Didi Global.

Meanwhile, S&P declared China Evergrande Group in default on Friday, more than a week after Fitch Ratings downgraded the developer when it failed to make its debt payments. Another property developer, Shimao Group, lost its investment-grade rating at Fitch on Friday, while Moody downgraded the firm deeper into junk.

Evergrande crashed 9.9 per cent while Shimao lost 8.6 per cent. Country Garden lost 4.1 per cent while its services unit sank 5.8 per cent.

The market trended lower despite the People’s Bank of China cutting the loan prime rate (LPR) – its benchmark borrowing cost – on Monday. The LPR was reduced for the first time since April 2020.

The one-year LPR was cut from 3.85 per cent to 3.8 per cent, while the five-year LPR remained at 4.65 per cent.

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China’s central bank unleashed another round of easing amid mounting economic pressures, after lowering banks’ reserve requirement ratio earlier this month.

Separately, the surprise death of a Chinese tycoon triggered sell-offs in nine companies that he controlled. Rags-to-riches tycoon Xie Zhikun, 61, founder of Zhongzhi Enterprise Group, died of a heart attack on Sunday. Hong Kong-listed investment holding firm Zhongjin Technology Services Group tumbled 37 per cent.

Major Asian markets fell. Japanese and South Korean shares lost at least 1.8 per cent while the Australian benchmark slipped 0.2 per cent.

In the mainland, two firms started trading for the first time. Hangzhou Bio-Sincerity Pharma-Tech, which develops and markets drugs, jumped 27 per cent. Hoymiles Power Electronics, a solar-microinverter maker, soared 30 per cent.

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