Hong Kong stocks experienced their most significant decline in three months on Tuesday, fueled by mounting worries about China’s sluggish housing market and consistently high US interest rates. The Hang Seng Index concluded the day with a 2.7% drop, marking its most substantial decline since early June. Despite a recent data uptick, concerns about China’s economic slowdown, a property market downturn, and geopolitical tensions with the US continue to weigh on investor sentiment.
Real estate stocks bore the brunt of the selloff in Hong Kong, with Country Garden, one of China’s largest property developers, witnessing a 4.4% decline. Its property services arm recorded a 7.1% decrease. Struggling with debt repayments and substantial losses in the first half of the year, Country Garden reflects the challenges faced by the real estate sector. Longfor Properties, another Hang Seng constituent, slid 6.5%.
In contrast, shares of Evergrande saw a notable 28% increase after resuming trading following a three-day halt. Despite this surge, Evergrande’s shares have plummeted by 75% since the end of a previous 17-month suspension in August, resembling penny stocks. Trading in Evergrande New Energy Vehicle, the group’s electric vehicle arm, remained suspended, pending the release of an announcement about “inside information,” according to the company’s filing on Tuesday.
The recent detention of Evergrande Group‘s founder and chairman, Xu Jiayin, by Chinese authorities on suspicion of crimes has intensified concerns about the fate of the debt-laden developer. The potential collapse of Evergrande could have global repercussions and prompt Beijing to intervene to stabilize the sector.
New industry data from China Real Estate Information Corporation (CRIC) revealed that China’s top 100 developers are still grappling with weak demand, with property sales dropping by 29% in September compared to the previous year. This marked the fourth consecutive month of declines, despite a marginal improvement from August. Analysts from Nomura noted that Beijing’s recent support for the property market may stabilize sales but is insufficient to bolster overall stock market sentiment.
Amidst these challenges, Hong Kong’s market benchmark has fallen over 12% this year, reaching its lowest level since November. The persistent uncertainties surrounding China’s property market and broader economic conditions continue to contribute to the market’s subdued performance.
