Hong Kong Stocks Slide Amid China's Property Crisis and Global Concerns

Hong Kong stocks faced further declines as China's property crisis deepened, and concerns mounted over an impending debt default by Country Garden Holdings. Tightened U.S. tech restrictions on Chinese companies and the escalating conflict in Israel and Gaza also weighed heavily on market sentiment.

During the local noon trading break, the Hang Seng Index experienced a 2 percent drop to 17,386.75, marking the most significant decline in about a week. The Tech Index saw a 1.9 percent tumble, while the Shanghai Composite Index fell 1.2 percent, reaching its lowest level this year.

Notable tech giants took a hit, with Alibaba Group falling by 1.8 percent to HK$80, JD.com slumping 5.1 percent to HK$97.60, Tencent losing 1.6 percent at HK$295.20, Baidu declining by 4.9 percent to HK$108.10, and Meituan retreating 3.3 percent to HK$110.

The property sector also witnessed a downturn, with a gauge tracking mainland Chinese developers listed in Hong Kong dropping 2 percent, nearing a one-year low. Longfor lost 3 percent to HK$11.56, while China Resources Land retreated 1.2 percent to HK$29.60.

The turmoil was exacerbated by the lack of clarity regarding Country Garden's debt servicing status. The Foshan-based developer allowed a 30-day grace period to pass for a US$15.4 million coupon on a US$500 million bond without any announcement. Rumors about key members of the founding family leaving the country were also rejected.

Hong Kong's benchmark index experienced a 2.4 percent loss during the week, driven by renewed U.S. tech restrictions on China and escalating political tensions in the Middle East. Earlier in the week, the Biden administration introduced new rules to limit China's access to advanced chips and chip-making tools, impacting graphics card manufacturers.

Meanwhile, home prices in 70 medium and large-sized Chinese cities decreased by 1.4 percent from the previous month, a drop from the 2.8 percent decline in August, as reported by Goldman Sachs, citing data from the National Bureau of Statistics.

Nomura analyst Jizhou Dong commented, "[The readings] show continued weakness in almost every aspect of the property market." He expressed concern about the apparent reluctance of both central and local governments to introduce more policies to stabilize sales and investments.

A majority of fund managers in Asia believed that a structural de-rating process was underway for Chinese stocks, leading to their China allocation reaching the most underweight position in a year, according to a survey by Bank of America. The persistent weakness in China's economic activity and a lack of coordinated easing measures have led to market fatigue and frustration, as stated by the bank's strategists.

In other Asian markets, South Korea's Kospi fell by 1.9 percent, Australia's S&P/ASX 200 lost 1.5 percent, and Japan's Nikkei 225 experienced a 1.7 percent decline. By fLEXI tEAM