Hong Kong stocks slide amid China property default risk while Sinopharm slides on index debut, L’Occitane crashes

Property default risk remains elevated, with Country Garden facing more debt maturities even as it averted another potential blow-up this week

Sinopharm Group slumped 8 per cent as the stock joins the Hang Seng Index membership after the latest quarterly review

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People walking past screens showing stock indices and prices outside a bank in Mong Kok, Hong Kong, Photo: Sam Tsang

Published: 10:51am, 5 Sep 2023Updated: 4:24pm, 5 Sep 2023

Hong Kong stocks fell from a three-week high, led by a retreat in property developers as concerns about debt defaults overshadowed Beijing’s efforts to revive home sales and repair market confidence. Sinopharm Group slumped after becoming a benchmark index member.

The Hang Seng Index slid 2.1 per cent to close at 18,456.91, after rallying 2.5 per cent on Monday to the highest level since August 11. The Tech Index dropped 2.6 per cent while the Shanghai Composite Index declined 0.7 per cent.

Chinese developers led losers, with China Resources Land sliding 5.1 per cent to HK$34.60 and China Overseas Land and Investment tumbling 3.9 per cent to HK$17.22. Tencent lost 1.3 per cent to HK$329 and Alibaba Group weakened 0.8 per cent to HK$92.35.

Elsewhere, Sinopharm dropped 8 per cent to HK$21.15 after the Hang Seng Index compiler added the stock to its membership from today. It replaced developer Country Garden, which tumbled 1 per cent to HK$1.01. L’Occitane slumped 17 per cent to HK$23, after its chairman ended deliberations to take the skincare producer private.

Country Garden, once the nation’s biggest home builder by sales, is said to have paid the US$22.5 million of coupons on two US dollar-denominated bonds before a September 6 deadline. The developer also faces US$2.5 billion in coupon and principal payments by December 31, according to its interim report.

Property stocks surged earlier this week as China eased requirements for first-home purchases and lowered mortgage rates, fuelling a buying spree in cities like Shanghai and Beijing. Still, the piecemeal measures may not sustain demand, and provide little help in tempering defaults among Chinese developers, according to Nomura Holdings.