Hong Kong stocks erase losses as China rate cut buoys property developers while BYD, EV makers slip amid price war

China’s commercial lenders made a bigger than expected cut in five-year loan prime rate on Tuesday, a move to spur home purchases
BYD led losses among Chinese EV makers after a fresh round of price wars threatens to erode profitability

Hong Kong stock market

Jiaxing Li

Published: 10:46am, 20 Feb 2024

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Hong Kong stocks rebounded as property developers advanced after a bigger than expected cut in a key onshore lending rate. BYD led electric-vehicle producers lower amid a fresh round of price wars. HSBC climbed before its earnings report.

The Hang Seng Index rose 0.6 per cent to 16,247.51 on Tuesday, overturning an earlier drop of as much as 0.6 per cent. The Tech Index erased a 1.6 per cent decline to close with a 0.4 per cent gain, while the Shanghai Composite Index climbed 0.4 per cent.

Longfor surged 3 per cent to HK$9.17, Wharf REIC jumped 3.3 per cent to HK$26.25 while Henderson Land gained 0.9 per cent to HK$21.30 and Sun Hung Kai added 0.9 per cent to HK$72.45.

China’s commercial lenders on Tuesday surprisingly cut the five-year loan prime rate, a benchmark for pricing onshore home mortgages, to 3.95 per cent from 4.2 per cent at the monthly setting. Economists had predicted a 10-basis point cut in a Bloomberg survey. The one-year rate was unchanged at 3.45 per cent, versus forecasts for a 5-basis point reduction.

“There is no shortage of stabilisation measures in place so far, but they have yet to convince the market,” said Gary Ng, senior economist at Natixis. “Investors are seeking more signals from Beijing to get a clearer understanding of future policy directions.”

The cut in the five-year lending rate underscores China’s renewed attempts to stop the multi-year rot in the housing market, a slump triggered by its “three red lines” policy in August 2020 that fanned a record amount of bond defaults among junk-rated developers. Recent official data showed home sales remained sluggish in the new year, while prices sagged.

BYD launches low-price plug-in hybrid, sparking price war in China

Meanwhile, BYD tumbled 2.3 per cent to HK$182.20, after it launched a plug-in hybrid EV model at 20 per cent below its previous version, with rival makers set to compete with price cuts. Geely Auto declined 0.1 per cent to HK$8.09 and Xpeng lost 3.7 per cent to HK$35.55.

The slump in EV stocks ate into early gains in the Year of the Dragon that were built on bets China will deliver its promise to stem a rout with forceful measures.

“As industry leaders cut prices, more carmakers will follow,” said Jason Chan, investment specialist at Bank of East Asia. “The price war is set to last for at least another six months which, along with sector overcapacity, would weigh on carmakers’ profitability. Export growth could also slow this year amid geopolitical risks.”

HSBC finishes latest round of US$7 billion buy-back before 2023 profit report

Elsewhere, HSBC climbed 0.4 per cent to HK$62.65 and its subsidiary Hang Seng Bank rose 1 per cent to HK$81.85. The UK banking group, which counts Hong Kong as its single biggest market, may report a 76 per cent jump in annual net profit in 2023 according to consensus among analysts tracked by Bloomberg. The report is due on Wednesday.

Other major Asian markets traded lower. The Kospi Index in South Korea tumbled 0.8 per cent while the S&P ASX 200 in Australia lost 0.1 per cent and the Nikkei 225 in Japan fell 0.3 per cent.