Hong Kong Stocks Sink to Three-Week Low as Growth Concern Mounts

Updated on
  • Brexit risk, Fed add to concern about China economy: KGI
  • Cheung Kong leads losses by developers over fragile outlook

Hong Kong stocks slumped, with the benchmark gauge dropping to its lowest level in three weeks, as investors fled riskier assets amid growing concern over the outlook for global growth and the possible impact of a British vote to leave the European Union.

The Hang Seng Index slid 2.1 percent, with Bank of China Ltd. weighing on the index as the lender traded without the rights to a dividend. Cheung Kong Property Holdings Ltd. led losses among real estate developers, while China Shenhua Energy Co. declined by the most in two months as U.S. crude fell below $48 a barrel. The Shanghai Composite Index retreated 0.5 percent as Wednesday’s rally faded.

Odds of the the Federal Reserve raising key borrowing costs this year have fallen below 50 percent, with Chair Janet Yellen saying Wednesday that the U.K.’s June 23 referendum was a factor in the central bank’s decision to hold rates steady. China’s economic activity remained subdued last month, even as new lending beat estimates, the latest figures show. In a sign of how desperate Hong Kong real estate companies are to boost flagging sales, Sun Hung Kai Properties Ltd. is offering mortgages worth as much as 120 percent of a home’s value at one of its projects.

Big Uncertainty

“The Hong Kong market has been under pressure for multiple factors recently,” said Ken Chen, an analyst at KGI Securities Co. in Shanghai. “Brexit is a big uncertainty now and has greatly reduced the appetite for risk assets globally, and the Fed has also expressed concern about the global economy. China’s May economic data recently released don’t look good either.”

The Hang Seng Index dropped to 20,038.42 at the close, falling for the fifth time in six days. The Hang Seng China Enterprises Index tumbled 2.3 percent, with all but two stocks retreating. The Shanghai Composite slid to 2,872.82 as Wednesday’s 1.6 percent rally fizzled.

Bank of China dropped to the lowest level since March 1, helping send a gauge of financial companies in Hong Kong down 2.1 percent.

Circumvent Curbs

Cheung Kong Property slid 2.1 percent. Sun Hung Kai fell 2 percent. The developer’s financing arrangement is aimed at attracting buyers in a market that has seen a correction of more than 13 percent since prices peaked in September. It’s also a way to circumvent government cooling measures that restrict traditional bank mortgages on properties costing less than HK$10 million ($1.3 million) to 60 percent of their value.

The decision Thursday by the Bank of Japan to hold off from easing monetary policy added to the risk-off sentiment, with the yen jumping past 105 per dollar for the first time since September 2014.

“Everybody is fleeing for safe haven," said Louis Tse, a Hong Kong-based director at VC Brokerage Ltd. "Sun Hung Kai’s 120 percent mortgage is a worrying sign."