Hong Kong stocks slump as funds sell on yuan outlook while Evergrande slides

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Hong Kong stocks tumbled as foreign investors continued to stay away amid concerns the yuan will weaken on widening interest-rate differentials. China Evergrande Group plunged after Chinese authorities detained some executives from its wealth management unit.

The Hang Seng Index fell 1.1 per cent to 17,999.41 at 2.48pm local time to near a three-week low. The Tech Index declined 1.5 per cent while the Shanghai Composite Index advanced 0.2 per cent.

Alibaba Group weakened 1.4 per cent to HK$85.05, e-commerce rival JD.com dropped 2.1 per cent to HK$122, while food delivery platform operator Meituan slipped 1.1 per cent to HK$122.90. Tencent declined 0.9 per cent to HK$314.40.

Hong Kong developers Sun Hung Kai Properties, New World Development and Henderson Land slipped by at least 1.3 per cent on concerns property prices will weaken as seven banks in the city prepare to raise mortgage rates. HSBC lost 0.5 per cent to HK$60.55 and Bank of China (HK) slipped 0.7 per cent toi HK$2.71.

The Hang Seng Index has retreated 1.1 per cent so far this month as investors ignored recovery signs and rued Beijing’s go-slow approach to revitalise the economy. The Chinese yuan has suffered as foreign funds sold US$2.1 billion of Chinese stocks last week, taking the six-week outflows to a record US$15 billion, Goldman Sachs said.

Foreign-exchange outflows from China amounted to US$42 billion in August versus US$26 billion in July, it added, the highest since 2016.

The yuan depreciated to 7.2893 per US dollar in recent offshore trading, versus 7.2807 on Friday, and traded near a 16-year low in the onshore market. Wall Street banks including Goldman and Bank of America expect China to further cut rates to spur the economy, while the Federal Reserve is seen pausing or hiking in the near term.

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“The People’s Bank of China still has more to do regarding incentivising the consumer sector and shoring up the troubled property sector,” said Tim Waterer, chief market analyst at KCM Trade.

China’s property market wobbles continued to hurt sentiment. Debt-laden Evergrande crashed as much as 25 per cent to HK$0.465, after police detained some staff at its wealth management unit after it failed to pay on some investment products. Its shares recently lost 1.6 per cent at HK$0.61.
Elsewhere, Country Garden Holdings slipped 2.8 per cent to HK$1.03. Once China’s largest home builder, the developer has sought to delay local bond maturities as more offshore debt payments are coming due. State-linked peer Sino-Ocean last week froze all offshore debt payments to restructure its finances.

Shenzhen Fuheng New Material jumped 10 per cent to 6.28 yuan on its first day of trading in Beijing, the only market debutant on Monday.

Other major Asian markets weakened. South Korea’s Kospi lost 1 per cent and Australia’s S&P/ASX 200 dropped 0.7 per cent. Japanese markets are closed for a holiday.

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