Hong Kong stocks approach 2-week low as banks, BYD tumble before China data

Hong Kong stocks approach 2-week low as banks, BYD tumble before China data underlining weak recovery, stimulus impact

Hong Kong stocks approached a two-week low before reports this week that may show more signs of China’s economic slowdown. Banks slipped amid speculation they will be asked to lend more to troubled property developers, while BYD slumped on price war among Chinese EV makers.

The Hang Seng Index dropped 1 per cent to 17,385.08 the local noon trading break to reach the lowest since November 17. The Tech Index slid 0.9 per cent, while the Shanghai Composite Index declined 0.8 per cent.

China’s top lender ICBC weakened 1.1 per cent to HK$3.75 while Construction Bank lost 1.1 per cent to HK$4.51 and Bank of China (Hong Kong) weakened 1 per cent to HK$2.84. Alibaba Group dropped 1.2 per cent to HK$75.30, Tencent retreated 0.9 per cent to HK$318.40 and Meituan declined 1.2 per cent to HK$107.80.

BYD tumbled 4.2 per cent to a three-month low of HK$218.80. The EV maker slashed prices on some older models by up to 10,000 yuan in a promotion campaign.

The Hang Seng Index is attempting to chart its first monthly advance since July amid China’s efforts to restore growth. The benchmark has risen 1.6 per cent this month, having lost a cumulative 15 per cent in the preceding three months. Still, Beijing will need to do more to arrest a slide in economic activity, Goldman Sachs said.

Top Chinese lenders came under pressure amid concerns their asset quality will suffer after reports suggesting Beijing will ask them to write more loans without collateral backing to help ease liquidity crunches faced by home builders, and to help stem a multi-year industry slump.

China urges banks to support property sector, but tide still against private firms

It will be difficult for developers to provide corresponding assets as collateral for now, but “offering unsecured loans also imposes significant risks for the banks involved,” according to Wang Yifeng, chief banking analyst at Everbright Securities said in a report.

Meanwhile, a government report today showed industrial profits rose 2.7 per cent in October from a year earlier, versus a 11.9 per cent rise in September. Manufacturing likely contracted in November, according to consensus forecasts by economists, before an official report on November 30.

“We expect this month’s manufacturing to remain sluggish,” Goldman Sachs said in a report. With new home sales slowing again in November, “more easing measures are needed to reduce left-tail risks”, it added.

Elsewhere major Asian markets mostly traded lower on Monday. Australia’s S&P/ASX 200 declined 0.6 per cent and South Korea’s Kospi weakened 0.9 per cent, while Japan’s Nikkei 225 added 0.3 per cent.

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