Hong Kong Stock Index plunges 3.9% as Evergrande contagion spreads beyond real estate to banks

Hong Kong’s benchmark stock index fell 3.9% this morning and is on track to close on its lowest year of nearly a year as contagion spread from the collapse of shares at real estate developer China Evergrande Group in the financial sector.

Shares in China Evergrande Group led the way, falling 16.9% to HK$2.11. They have lost 88% from a recent spike in January, sparking protests from those demanding debt repayment and wiping out much of their billionaire chairman Hui Ka Yin’s fortune.

Other real estate developers fell on concerns over a real estate market surplus, debt repayment problems and slower economic growth at a time when the effects of Covid-19 have already hurt spending.

Guangzhou R&F fell 7.3% to HK$4.21. The more than halving in value since May has tarnished the fate of Hong Kong billionaire Li Sze Lim and Chinese billionaire Zhang Li.

A number of financial institutions linked to Guangdong province, where Evergrande is located, collapsed this morning. Among them, government-backed insurer Ping An lost 7.5% to HK$50.40; its shares have now fallen in half from a recent high of HK$103.10 in January. China Merchants Bank collapsed 9.3%.

Today’s carnage also spread to real estate stocks in Hong Kong. New World Development, controlled by the Hong Kong billionaire Cheng clan, lost 11.40% to HK$30.70.

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

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@rflannerychina