Hong Kong stocks log worst month since 2008 as Longfor’s 24 per cent plunge clouds tech rally while Fed rate concerns linger

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The Federal Reserve is likely to raise its key rate by another 75 basis points later this week, according to Fed fund futures

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Pedestrians walk past an electronic board displaying the Hang Seng Index in Central, Hong Kong on October 28. Photo: Yik Yeung-man

Published: 10:59am, 31 Oct 2022Updated: 4:53pm, 31 Oct 2022

Hong Kong stocks suffered the worst month since October 2008, as a 24 per cent slump in developer Longfor Group abetted losses. A government report showed China’s economy cooled this month and concerns about new Covid-19 snap lockdowns revived.

The Hang Seng Index fell 1.2 per cent to 14,687.02 at the close of Monday trading, bringing the setback this month to 14.7 per cent. The Tech Index rose 1 per cent on Monday trading, narrowing from a 3.5 per cent surge. The Shanghai Composite Index ended 0.8 per cent weaker to end with a fourth successive month of losses.

Longfor Group crashed by about a quarter to HK$9.99 after its billionaire co-founder Wu Yajun stepped down from key positions, citing health among other reasons. The plunge erased about US$2.5 billion from its market value. Country Garden tumbled 9.8 per cent to HK$1.01, while all 12 index members in the property industry retreated 4.3 per cent on average.

That blemished a rally in tech stocks. Tencent leapt 2.8 per cent to HK$206.40 while Meituan advanced 3.4 per cent to HK$125.90. BYD surged 6.2 per cent to HK$175.90 after reporting record-high earnings in the third quarter.

“A lot of bad news have already been priced in, so there’re some dip-buying,” said Dickie Wong, executive director of research at Kingston Securities. The rebound could be short-lived as the outlook remains gloomy amid China’s slowdown and potential US rate hikes ahead, he added.

China still presents significant opportunities for global investors despite a market drubbing last week sparked by the Communist Party’s twice-a-decade leadership reshuffle, according to Mary Callahan Erdoes, CEO of JPMorgan’s asset management business. The headwinds hobbling the world’s second-largest economy “shall pass” over time, she said in an interview.

The Hang Seng Index completed a 14.7 per cent drop in October after China’s top leadership reshuffle fanned worries about market-unfriendly policies. That brought the setback this year to 37 per cent, which erases over US$1.8 trillion from the city’s stock market.