Hong Kong stocks sink to near one-year low on tech, China Evergrande fallout without mainland buying support

  • Tech losses and China Evergrande’s free-fall underline rising concerns among investors about credit risks
  • Holidays will deprive Hong Kong market of buying support from mainland funds as the Stock Connect link closes for three days

Hong Kong stocks sank to the lowest in about a year as China Evergrande Group’s free-fall stoked concerns about credit risks among indebted developers and Chinese officials failed to calm investors about tech sector clampdown.

The Hang Seng Index slumped 4 per cent to 23,920.74 as of 11.35am local time, a level not seen since early October. The drop today is the most since a 4.2 per cent crash on July 27 as all 60 index members declined. The benchmark has lost about 17 per cent since June 30, set for the worst quarter so far in six years.

The local market weakened as a public holiday in China deprived it of the buying support from mainland funds. The Stock Connect’s southbound trading link with Hong Kong will be shut over the next three days due the the Mid-Autumn festival, according to exchange data.

“Stock market liquidity will likely be sluggish” because of the holiday effect, KGI Securities said in a research note on Monday. “Concerns [about] Evergrande debt problem depressed China property and property management sector. “Short term sentiment remained weak.”

Tencent slipped 2.4 per cent to HK$450.60, carmaker BYD lost 7.6 per cent to HK$233.20 and Meituan retreated 3.2 per cent to HK$233.20. The Hang Seng Property sub-index tumbled 6 per cent to the lowest level in more than seven years as Henderson Land, New World Development and Sun Hung Kai led losses.

China Evergrande sank 17 per cent to HK$2.11 taking its six-day losses to 43 per cent. The developer on the weekend offered its properties at discounted prices to repay creditors, after hiring outside advisers to tackle its debt burden.

China’s top regulators defended their market-roiling crackdown on various industries in a meeting with Wall Street executives, while reassuring them the stricter rules are not aimed at stifling technology companies or the private sector, according to a Bloomberg report.

Author: Cheryl Heng, SCMP

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