Market Updates

Hang Seng Index Drops 2%, Sharp Decline In China Industrial profit Growth

Li Chen
27 Jun, 2024
Hong Kong

    Investors turned cautious and sold stocks in Hong Kong and Shanghai after the latest Chinese economic data underwhelmed. 

    The Hang Seng dropped 2% and the CSI 300 index declined 0.3% after the sharp slowdown in industrial profit added to the ongoing property market woes. 

    China's profit growth among industrial companies slowed to 0.7%, decelerating from a 4% increase in the previous month, the National Statistics Bureau reported Thursday. 

    The data confirmed the uneven and fragile economic recovery as policymakers struggle to revive consumer confidence and economic growth. 

    The Beijing area government relaxed rules to support the property market, which drew tame reactions from investors. 

    The local government lowered down payment and mortgage rates for first-time home buyers, hoping that relaxed measures would support a higher level of activity. However, measures did not go far enough and were deemed late following the similar announcements from other Tier 1 cities. 

    Market sentiment was also on the backfoot after the Japanese yen dropped to a fresh new low, crossing the 160 mark against the U.S. dollar. 

    The steady devaluation of the yen put additional pressure on the Chinese yuan and supported capital outflows. 

    Property sector stocks were under renewed pressure as several companies neared the lower market cap requirement limit to participate in the Stock Connect program. 

    The cross-border investment program requires a minimum market cap of HK$4 billion, or $512 million, to attract capital from mainland investors. 

    The latest stock price weakness is likely to add to the woes of the property companies as they struggle with liquidity stress and financial restructuring demand from creditors. 

     

    China Stock Movers 

    The CSI 300 index decreased 0.3% to 3,465.98, and the Hang Seng Index dropped 2% to 17,721.01. 

    Property developers were in focus as eight companies are teetering near the threshold requirement to be included in the Stock Connect program. 

    Shimao Group Holdings declined a fraction to HK $0.76, and Soho China decreased 0.2% to HK $0.68. 

    Country Garden Holdings, one of the leading residential property developers, is scheduled for a liquidation hearing next month in Hong Kong. 

    New World Development declined 0.4% to HK $7.20, and the Hong Kong-based property developer sold a stake in a project to its parent company for 1.44 billion yuan to meet its debt obligations. 

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