Hong Kong stocks slide amid China property default risk while Sinopharm slides on index debut, L'Occitane crashes
Hong Kong stocks fell from a three-week high, led by a retreat in property developers as concerns about debt defaults overshadowed Beijing's efforts to revive home sales and repair market confidence. Sinopharm Group slumped after becoming a benchmark index member.
The Hang Seng Index slid 1.5 per cent to 18,559.92 at the local noon trading break, after rallying 2.5 per cent on Monday to the highest level since August 11. The Tech Index dropped 1.5 per cent while the Shanghai Composite Index declined 0.6 per cent.
Chinese developers led losers, with China Resources Land sliding 4.8 per cent to HK$34.70 and China Overseas Land and Investment tumbling 3.2 per cent to HK$17.34. Tencent lost 1.7 per cent to HK$327.80 and Alibaba Group weakened 0.3 per cent to HK$92.90.
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Elsewhere, Sinopharm dropped 4.3 per cent to HK$22 after the Hang Seng Index compiler added the stock to its membership effective from today. It replaced developer Country Garden Holdings, which tumbled 2 per cent to HK$1. L'Occitane slumped 25 per cent to HK$20.80, after its chairman ended deliberations to take the skincare producer private.
Limiting losses, Semiconductor Manufacturing International Corp added 0.2 per cent to HK$21.90. Technical reports showed Huawei's most-advanced smartphones Mate 60 Pro and poised to sell millions of sets, used high-end chips produced by China's biggest chip maker.
Country Garden, once the nation's biggest home builder by sales, faces a September 6 deadline to pay US$22.5 million of coupons on two US dollar-denominated bonds. The company declined to comment on Monday. The developer also faces US$2.5 billion in coupon and principal payments by December 31, according to its interim report.
Property stocks surged this week as China eased requirements for first-home purchases and lowered mortgage rates, fuelling a buying spree in cities like Shanghai and Beijing. Still, the piecemeal measures may not sustain demand, and provide little help in tempering defaults among Chinese developers, according to Nomura Holdings.
"Beijing may have to introduce more aggressive easing measures to ensure a real recovery," said Lu Ting, its chief China economist. China might need to rescue major developers, lift almost all restrictions on home prices and sales, and curbs on home purchases in all cities, he added.
Meanwhile, a report today showed the Caixin China PMI Services index fell to 51.8 in August from 54.1 in July, signalling a wobbly recovery in the economy. An earlier report showed its PMI manufacturing gauge expanded in August, following a contraction in July.
Drug maker Hangzhou Minsheng Healthcare soared 250 per cent to 34.96 yuan on the first day of trading in Shenzhen.
Other major Asian markets also weakened. Japan's Nikkei 225 slipped 0.1 per cent and Australia's S&P/ASX 200 lost 0.5 per cent, while South Korea's Kospi was little changed.
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