Hong Kong stocks restrained by slide in property developers on China tax plan while oil firms and HSBC advance

  • Concerns about China’s property-tax trial and a resurgence in Covid-19 cases in mainland provinces keep risk appetite at bay
  • Oil firms advance as Brent crude climbs above US$85 a barrel on tighter supply outlook; HSBC gains before third-quarter earnings reports

Hong Kong stocks held near a six-week high as Chinese property developers tumbled after the government said that it will extend a trial to tax property owners to rein in home prices. Gains in oil and biotech companies steadied the market.

The Hang Seng Index dropped 0.1 per cent to 26,150.24 at the local noon break after changing directions about 10 times. Developers Longfor Group and Country Garden were among the worst benchmark performers with at least 2.7 per cent slide, while WuXi Biologics and PetroChina rose more than 2 per cent.

The Hang Seng Tech Index added 0.6 per cent while in China, the Shanghai Composite Index climbed 0.4 per cent. A gauge of mainland-listed developers sank 2 per cent, with China Vanke, the nation’s biggest developer, slumping 3.9 per cent and Tianjin Jinbin Development sliding 4.6 per cent.

China will tax owners of residential, commercial properties and lands in other selected regions, the state-run Xinhua News Agency said over the weekend, without giving a timetable and other details. The trial will last for five years before it is signed into law, it added. The trial has been ongoing for years but only confined to Shanghai and Chongqing.

“We are neutral to this news, but expect investors to turn more cautious in the near term until there is more clarity on scheme details,” analysts led by Stephen Cheung at Jefferies wrote in a note. “We expect [property] sales to remain weak and more meaningful easing to come in December.”

Baijiu liquor distiller Kweichow Moutai dropped 1.2 per cent in Shanghai after third-quart profit increasing 12 per cent, missing analysts’ estimates. China International Capital Corp cut its 2021 earnings forecast for the company by 3.2 per cent, citing slower distribution.

Meanwhile, a resurgence in Covid-19 cases in mainland China also kept risk-taking at bay and weighed on consumer stocks. The health authority has cautioned the situation could worsen in the coming days as the delta virus strain spreads to at least 11 provinces. Some local authorities in the northern province of Gansu and Inner Mongolia have halted transport services to contain infections.

Haidilao International Holding, the chain hotpot restaurant operator, shed 7.9 per cent in Hong Kong, heading for its worst single-day performance since July.

On the flip side, PetroChina climbed 2.1 per cent in Hong Kong as Brent crude climbed above US$85 a barrel on concerns about supply constrain.

Local traders are also closely watching looking to earnings releases by Hong Kong’s biggest banks for clues on their exposure to debt-ridden China Evergrande Group. HSBC added 0.5 per cent before the lender reported a 36 per cent jump in the third quarter, trailing consensus for 41 per cent rise. Bank of China (Hong Kong) and Standard Chartered report later this week.

China Evergrande rose 0.4 per cent after saying it has restarted working on more than 10 property projects. Its unit China Evergrande New Energy Vehicle surged 14 per cent after the Securities Times reported that its group company shift its focus to car making from real estate within 10 years, citing chairman and founder Hui Ka-yan.

Author: Zhang Shidong, SCMP

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