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Hong Kong stocks drop for third day despite China rate cut amid lacklustre economic data and fear of property contagion

  • Data released on Tuesday suggests an across-the-board slowdown in China’s economy, with industrial output and retail sales both slowing
  • An index tracking the largest mainland companies listed in the city crashed 7.7 per cent this month, the worst among 92 global equity gauges

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A pedestrian passes by Exchange Square, home of the Hong Kong stock exchange, on July 14, 2023. Photo: AP
Jiaxing Li
Hong Kong stocks dropped for a third day as contagion fears spiked amid fresh data that pointed to a weak economy and deepening property-sector woes. Even Beijing’s unexpected key policy rate cut failed to stem the bearish sentiment.
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The Hang Seng Index dropped 1 per cent to 18,581.11 at the closing of Tuesday trading, the lowest level since July 10. The tech index slipped 0.7 per cent while the Shanghai Composite Index lost less than 0.1 per cent.

Alibaba Group lost 1.7 per cent to HK$91.20, Meituan weakened 1.1 per cent to HK$133.90 and JD.com declined 1.4 per cent to HK$142.20. EV maker BYD tumbled 1.3 per cent to HK$235.40, while sportswear maker Li Ning slid 1.9 per cent to HK$41.05.

Fresh data released on Tuesday showed that China’s economy is seeing an across-the-board slowdown. Industrial output grew 3.7 per cent last month from a year earlier, slowing from the 4.4 per cent gain recorded in June. Retail sales also rose at a slower pace last month, data released on Tuesday by the National Bureau of Statistics showed.
In a surprise to the market, China’s central bank lowered the interest rate on its one-year medium-term lending facility (MLF) loans to 2.5 per cent from 2.65 per cent on Tuesday, which will inject 410 billion yuan of additional liquidity.

“The biggest concern among investors now is China’s worsening growth prospects, and they don’t believe the rate cut today can really help,” said Gary Ng, a senior economist at Natixis in Hong Kong. Recent liquidity problems in the property and finance sectors are also triggering fear of contagion risks, he added.

The property crisis deepened after the cash-strapped giant Country Garden proposed extending repayment for an onshore private bond due September 2 with an outstanding of 3.9 billion yuan (US$537 million), according to Reuters. The company gained 1.3 per cent to HK$0.81 to recover from the recent sell-off, while a gauge tracking mainland developers listed in Hong Kong slipped 1 per cent, the lowest level this year.

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