Hong Kong stocks tumble as yuan outlook stokes fund outflows while Evergrande, Country Garden slide on more bad news

Foreign funds sold US$2.1 billion of Chinese stocks last week, while foreign exchange outflows reached US$42 billion in August, the most since 2016
Evergrande slumped as much as 25 per cent after authorities detained some executives from its wealth management unit

Hong Kong stock market

Jiaxing Li

Published: 10:43am, 18 Sep, 2023

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Hong Kong stocks tumbled as foreign investors continued to stay away amid concerns the yuan will weaken on widening interest-rate differentials. China Evergrande Group slid after authorities detained some executives from its wealth management unit.

The Hang Seng Index fell 1.4 per cent to 17,930.55 at the close of Monday trading to a three-week low. The Tech Index declined 2.2 per cent while the Shanghai Composite Index gained 0.3 per cent.

Alibaba Group weakened 2.4 per cent to HK$84.20, e-commerce rival JD.com dropped 2.9 per cent to HK$121, while food delivery platform operator Meituan slipped 1.9 per cent to HK$122. Tencent declined 1.6 per cent to HK$312.20.

Hong Kong developers Sun Hung Kai Properties, New World Development and Henderson Land each slipped by almost 2 per cent on concerns property prices will weaken as seven banks in the city prepare to raise mortgage rates. HSBC lost 0.2 per cent to HK$60.75 and Bank of China (HK) slipped 0.4 per cent toi HK$2.72.

The Hang Seng Index has retreated about 2 per cent this month as investors ignored recovery signs and rued Beijing’s go-slow approach to revitalise the economy. Foreign funds sold US$2.1 billion of Chinese stocks last week, taking the six-week outflows to a record US$15 billion, Goldman Sachs said.

Foreign-exchange outflows from China amounted to US$42 billion in August versus US$26 billion in July, it added, the highest since 2016.

The yuan depreciated to 7.2958 per US dollar in recent offshore trading, versus 7.2807 on Friday, and traded near a 16-year low in the onshore market. Wall Street banks including Goldman and Bank of America expect China to further cut rates to spur the economy, while the Federal Reserve is seen pausing or hiking in the near term.

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“The People’s Bank of China still has more to do regarding incentivising the consumer sector and shoring up the troubled property sector,” said Tim Waterer, chief market analyst at KCM Trade. Beijing is still not providing sufficient stimulus to reboot growth, research firm Alpine Macro added.

China’s property market wobbles continued to hurt sentiment. Debt-laden Evergrande crashed as much as 25 per cent to HK$0.465, after police detained some staff at its wealth management unit after it failed to pay on some investment products. Its shares fell 1.6 per cent at HK$0.61 at the close of trading.

Elsewhere, Country Garden Holdings slipped 1.9 per cent to HK$1.04. Once China’s largest home builder, the developer has sought to delay local bond maturities as more offshore debt payments are coming due. State-linked peer Sino-Ocean last week froze all offshore debt payments to restructure its finances.

Other major Asian markets weakened. South Korea’s Kospi lost 1 per cent and Australia’s S&P/ASX 200 dropped 0.7 per cent. Japanese markets are closed for a holiday.