Home Business Hong Kong stocks tumble after China Evergrande scraps creditor meetings, triggering concerns about the property sector

Hong Kong stocks tumble after China Evergrande scraps creditor meetings, triggering concerns about the property sector

by Mark Mendoza

Hong Kong stocks took a hit on Monday, falling by the most in three weeks, as investor concerns grew over China’s property market. The Hang Seng Index dropped 1.8 percent to 17,729.29 at close, adding to the 0.7 percent fall it experienced last week. The Hang Seng Tech Index also slipped 2.7 percent, while the Shanghai Composite Index retreated 0.5 percent.

The decline in stocks came as China Evergrande Group, the world’s most indebted developer, cancelled creditor meetings, raising worries about the intensifying property crisis in China. This setback to Evergrande’s debt restructuring plans further dented investor confidence, causing property stocks to be among the largest decliners. Longfor Group saw a 6.5 percent slide to HK$14.16, while Country Garden Services Holdings slumped 4.3 percent to HK$8.21. E-commerce platform JD.com and Tencent Holdings also saw significant drops.

China Evergrande itself experienced a massive tumble of 22 percent to HK$0.43 after it stated that it was unable to meet the regulatory requirements for new bond issuances in another exchange filing. China Aoyuan Group, another property developer, saw an even steeper decline of 72 percent to HK$0.325 as trading resumed following a suspension since March 2021 for a debt revamp.

The current situation has sparked concerns about China’s property crisis and its impact on the economy. Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai, remarked that the property market plays a crucial role in China’s economy and that its troubles will undoubtedly weigh on stocks. With the size and significance of the industry, it will be challenging for any other sector to replace real estate as a stabilizer of the economy in the near future.

Statistics from China Galaxy Securities show that the property sector alone accounted for 6.1 percent of China’s economy last year, and industries linked to the real estate market contributed to about a quarter of the country’s economy.

Last week, local stocks experienced a third consecutive week of decline as investors worried that China’s piecemeal stimulus measures would not be sufficient to counter the slowdown in economic growth. Despite efforts by Beijing to cut mortgage rates, remove purchase restrictions, and reduce banks’ reserve requirement ratio, investors remain skeptical. The Hang Seng Index has dropped over 6 percent in the third quarter of 2023, heading for its second consecutive quarterly loss.

In the midst of the property slump and lackluster stimulus policies, BlackRock, the world’s largest asset manager, has lost confidence in Chinese stocks. The company downgraded its conviction amid the deteriorating property market and mounting losses.

On Monday, four companies made their trading debut, with mixed results. LC Logistics dropped 0.6 percent, while Wuhan YZY Biopharma remained unchanged from its offer price in Hong Kong. On the other hand, Jiangsu Hengxing New Material Technology, a chemical products manufacturer, jumped 19 percent in Shanghai, and Anhui Wanbang Pharmaceutical Technology rose 9 percent in Shenzhen.

In other major Asian markets, Japan’s Nikkei 225 climbed 0.9 percent, South Korea’s Kospi retreated 0.5 percent, and Australia’s S&P/ASX 200 added 0.1 percent.

Overall, the uncertainties surrounding China’s property market continue to weigh on Hong Kong stocks, raising concerns about the broader economic impact. Investors will closely monitor developments in the real estate sector and any further measures taken by Chinese authorities to stabilize the market and support economic growth.

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