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Hong Kong Index Closes Down 3.3% As Evergrande Plunges, Contagion Spreads

Hong Kong’s benchmark stock index plunged 3.3% to close at a near one-year low of 24,099.14 as contagion spread from the collapse of shares at real estate developer China Evergrande Group into the financial industry.

Shares in China Evergrande Group led the way, falling 10.2% to HK$2.28. They’ve lost 87% from a recent peak in January, spawning protests from those demanding debt repayment and erasing much of the fortune its billionaire chairman Hui Ka Yin.   

Other real estate developers fell on worries about a property market glut, problems connected to debt repayment and rising interest rates, and slower economic growth in China at a time when fallout from Covid-19 has already hurt spending.

Guangzhou R&F dropped 7.3% to HK$4.29. The more than halving of its value since May has cut into the fortunes of Hong Kong billionaire Li Sze Lim and mainland China billionaire Zhang Li. Country Garden, controlled by billionaire Yang Huiyan, fell by 6% to HK$6.55; the big develop has lost nearly 39% of its market capitalization since mid-January.

A number of financial institutions with ties to Guangdong Province where Evergrande is based fell.  Among them, government-backed insurer Ping An lost 5.8% to HK$51.35; its shares have now declined by half from a recent high of HK$103.10 in January.  China Merchants Bank plunged 9.4% to HK$57.50.

Today’s carnage also spread to Hong Kong real estate stocks. New World Development, controlled by the Hong Kong billionaire Cheng clan, lost 12.30% to HK$30.40.   Bank of East Asia, one of Hong Kong’s oldest banks, lost 4% to HK$12.14.

Mainland China stock exchanges are closed today and tomorrow for the Mid-Autumn Festival.  The Hong Kong Stock Exchange will be closed on Sept. 22.

See related posts:

What Would A Restructuring of Evergrande Look Like?

What Will Become Of Cash-Strapped Evergrande?

@rflannerychina

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