Hong Kong stocks fall as threat of US rate hike haunts market, troubled Evergrande surges after trade suspension lifted
- The yields on US Treasuries soared as the rhetoric of Fed officials pointed towards further rate hikes
- Troubled property developer China Evergrande jumped as much as 42 per cent to HK$0.46 per share as it resumed trading on Tuesday
Tencent Holdings slid 1.8 per cent to HK$300.60, Alibaba Group lost 2.9 per cent to HK$83.10 and e-commerce platform JD.com retreated 3.2 per cent to HK$111.40. Local property company New World Development sank 5.2 per cent to HK$14.44, Henderson Land dropped 5.1 per cent to HK$19.60 while Sun Hung Kai Properties lost 3 per cent to HK$81.30.
Rising borrowing costs continued to weigh on sentiment. The yield on the 10-year US Treasury, a benchmark for corporate bonds, rose to 4.699 per cent during Asian trading hours to hit the highest level since 2007, while the US dollar index rose to its highest level since November.
“Stay neutral on China,” said Yan Wang, chief emerging markets and China strategist at Alpine Macro, in a note on Tuesday. A cyclical upturn might not come any time soon as signs of growth have remained depressed while Beijing’s policy stimulus efforts have been largely underwhelming.
03:18
China Evergrande suspends market trading amid questions about chairman’s whereabouts
Still there were analysts who felt the surge in US Treasury yields was unlikely to be sustained amid a looming economic slowdown.
“We think that the now popular assumption that interest rates will be held “higher for longer” will prove incorrect as economic growth disappoints and price pressures recede,” said Capital Economics in a note which predicted the US Federal Reserve would cut rates aggressively next year.
“A step-up in policy support should deliver a modest cyclical recovery in the near term,” the research note said about China. “But various structural factors including demographics and global fracturing mean that a sustained turnaround is unlikely.”
The Hang Seng Index has tumbled 5.9 per cent over the past three months, on the back of a 7.3 per cent loss in the second quarter. Overseas investors have sold a record US$17.5 billion worth of A shares – yuan-denominated shares of Chinese companies traded in domestic markets – in the past two months, trimming the net inflow this year to US$16.2 billion.
The exposure to China of global funds is now at a decade-low, according to Goldman Sachs.
Other key Asian markets were mixed. Australia’s S&P/ASX 200 lost 1.3 per cent and the Nikkei 225 Index in Japan dropped 1.6 per cent. South Korea’s Kospi edged up 0.1 per cent.
