Hong Kong stocks waver as traders dump Chinese developers amid distress while Alibaba, Tencent lead tech advance

On Jul 14, 2022 53

Pedestrians walk past a stock ticker outside Exchange Square in Central, Hong Kong. Photo: EPA-EFE

An index tracking mainland property developers has logged two weeks of losses totalling 28 per cent
Distressed developers from Fantasia to Sunac and Guangzhou R&F have struggled to repay creditors amid sliding home sales and loss of access to funding

Hong Kong stocks were mixed as investors dumped Chinese property developers amid a deepening credit crunch after homebuyers threatened to stop paying for their purchases. Alibaba and JD.com led tech stocks higher.

The Hang Seng Index climbed 0.2 per cent to 20,848.28 at the local noon trading break, halting a three-day slide. It earlier fell as much as 0.4 per cent. The Hang Seng Tech Index added 1.7 per cent, while the Shanghai Composite Index added 0.3 per cent.

Country Garden Holdings fell 1.4 per cent to HK$3.62 and Longfor Group tumbled 6.1 per cent to HK$29.45. China Overseas Land lost 1.9 per cent to HK$22.85, while China Merchants Bank also tumbled 4.5 per cent to HK$41.80.

The Hang Seng Mainland Properties Index has not had a daily gain in the past two weeks, capping a 28 per cent decline. Buyers in at least 100 real estate projects are threatening to stop servicing their mortgages on homes abandoned by developers, mainland Chinese media reported, citing filings and petitions.

“The news will continue to drag down developers’ share prices in near term until policy makers step in to solve the issue,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities. “Regulators have to react promptly to prevent contagion of the issue.”

Chinese developers from Fantasia Group to Sunac and Guangzhou R&F Properties have struggled to repay creditors as home sales slumped and Beijing’s “three red lines” policy shut weak borrowers from the loan and credit markets at home and abroad, adding to mounting default cases.

JD.com rose 3.6 per cent to HK$246.20 and Alibaba Group advanced 2.2 per cent to HK$109.80. NetEase added 1.9 per cent to HK$141.60 and Meituan gained 2.6 per cent to HK$185.10, while Xiaomi appreciated 1.1 per cent to HK$12.94.

“Regulatory pressure is easing and it is a better situation for Chinese tech stocks than last year,” said Dickie Wong, executive director of research at Kingston Securities. After the Shanghai lockdown, “almost every sector on the mainland has their earnings improving,” he added.

Tianqi Lithium retreated 2.3 per cent to HK$80.10 on its second day of trading, after closing unchanged on its debut on Wednesday. Its Shenzhen-listed stock lost 0.9 per cent to 127.46 yuan.

Shanghai International Airport Co rose 4.5 per cent to 53.31 yuan, after denying social media speculation on Wednesday it would be cancelling flights in and out of the city’s two main gateways amid rising coronavirus cases.

Major Asian markets rose, with Japanese shares gaining 0.7 per cent. Australian stocks added 0.4 per cent, while South Korean equities added 0.1 per cent. US stocks fell overnight, after consumer prices rose to a four-decade high in June and stoking concerns about a more aggressive rate increase later this month.

Author: Cheryl Heng, SCMP