Hong Kong stocks retreated for a second week as traders tempered risk-taking amid concerns about China Evergrande Group’s debt woes as a bond payment deadline passed without an update.
The Hang Seng Index fell 1.3 per cent to 24,192.16 at the close of Friday trading, bringing the decline in the 60-member gauge to almost 3 per cent for the week. The Hang Seng Tech Index lost 2.2 per cent. In mainland China, the Shanghai Composite Index slipped 0.8 per cent in a holiday-shortened week.
Among the biggest decliners were glassmaker Xinyi Glass, which slumped 7.3 per cent to HK$23.40 while sportswear maker Li Ning slipped 5.4 per cent to HK$88.70. Countering losses, Ping An Insurance advanced 2.2 per cent to HK$54.25 while Meituan added 0.7 per cent to HK$244.40.
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Evergrande tumbled 11.6 per cent to HK$2.36, giving up most of the 18 per cent relief rally on Thursday. The stock has slumped more than 80 per cent this year as survival hangs in the balance. The firm resolved a loan interest payment this week but was silent on an offshore bond interest due on Thursday.
The developer, which had liabilities of about US$305 billion on June 30 or 2 per cent of China’s GDP, roiled global markets this week amid concerns its potential default would trigger a deeper slowdown in the world’s second biggest economy just as global funds are rushing in, while fanning social disorder from angry homebuyers and investors.
“Without access to fresh funding, Evergrande may find it challenging to pay suppliers, finish ongoing projects or raise income,” said Carlos Casanova, senior Asia economist at Union Bancaire Privee, a Swiss private bank. “The next weeks will therefore provide more visibility as to how China plans to unwind the company and how it intends to walk the tight line between growth and reform.”
Liquidity injections by the People’s Bank of China during the week helped calm nerves but the sell-off resumed while investors pondered about the potential default.
Evergrande’s property management services unit fell 4.4 per cent to HK$4.33, while its new energy vehicle arm tumbled 23.4 per cent to HK$2.23.
Dow Jones earlier reported that Chinese authorities are asking local governments to prepare for the group’s possible downfall. Global fund managers predicted a range of outcomes, including a “controlled demolition” and a state takeover.
Tech stocks also took some beating. Alibaba Group Holding, the owner of this newspaper, fell 2.8 per cent while Kuaishou sank 9 per cent and Tencent Holdings lost 0.6 per cent.
Markets in Asia-Pacific were mixed, following an overnight rally in US stocks. The benchmark in Japan rallied 2 per cent while equities in South Korea and Australia slipped by about 0.1 to 0.4 per cent.
Henan Liliang Diamond, which makes synthetic diamond products, jumped 1,112 per cent from the initial public offering price on the first day of trading in Shenzhen. Another debutant, Zhangjiagang Haiguo New Energy, which provides and sells hardware products, climbed 196 per cent.
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