Hong Kong stocks experienced their biggest one-day drop in three months, as concerns grew over China’s weak housing market and persistently high US interest rates. The Hang Seng Index fell 2.7%, marking its largest decrease since June, and bringing its total decline for the year to over 12%. Investor fear persists regarding China’s economic slowdown, a slump in the property market, and tensions between Beijing and Washington that have put tech companies at risk. Real estate stocks were among the hardest hit in Hong Kong, with Country Garden, one of China’s largest property developers, sinking 4.4% and its property services arm down 7.1%. Rival Longfor Properties also slid 6.5%.
Amidst the downturn, Evergrande Group’s shares closed up 28% after a three-day halt in trading. However, they have lost 75% since a previous suspension of trading ended in August, and now trade at a low level comparable to a penny stock. Trading of Evergrande New Energy Vehicle, the company’s electric vehicle arm, remains suspended pending the release of an announcement about “inside information.” Last week, Evergrande Group announced that its founder and chairman, Xu Jiayin, had been detained by Chinese authorities on suspicion of crimes, leading to fears of bankruptcy and potential global market repercussions in the property sector.
China’s 100 largest developers are still grappling with weak demand, as data from the China Real Estate Information Corporation reveals that total property sales by these developers dropped 29% in September compared to the previous year. This is the fourth consecutive month of decline, following a 35% drop in August. Beijing’s recent support for the property market has contributed to a slight improvement in September; however, Nomura analysts believe that continued policy relaxation is necessary to stabilize property sales, but it is insufficient to boost stock market sentiment. The concerns about China’s property market were compounded by worries that US interest rates could remain high, as US Treasury yields reached a 16-year high of 4.7%. JPMorgan Chase CEO Jamie Dimon has even suggested that the Federal Reserve may continue to hike rates until they reach 7%. Amidst these uncertainties, Asian markets were broadly affected, with Japan’s Nikkei 225 dropping 1.6% and Australia’s S&P/ASX 200 losing 1.3%, while Chinese and South Korean markets were closed for public holidays. European and US markets were also impacted, with mixed trading in Europe and little change in US futures.
