Mid-Week In China: A Tough Export Climate & More Property Woes Sink Hong Kong Stocks

Fears of an increasingly tough climate for Chinese exporters and more malaise in the property market sent Hong Kong shares trading lower Wednesday. After trying to rise higher in the morning, the Hang Seng Index finished Wednesday 0.8% down at 17,195.84.

The South China Morning Post reported that China’s exporters are “navigating a bumpy road” towards increasing sales overseas, particularly in the US. Chinese exports fell 8.8% from the previous year in August while shipments to the US were 9.5% lower, falling for the 13th consecutive month, the paper reported. As such, many Chinese exporters are now eyeing other destinations across South East Asia in which to base operations.  

The International Monetary Fund (IMF) said Tuesday that ongoing disruptions to global trade, prompted by political tensions created as a result of the war in Ukraine and an increasing détente between the US and China could lead to price volatility in imports and exports for global goods, food shortages and make green energy solutions more costly to implement.

Exporter-related shares Fosun International Limited FOSUF, Sinopec Shanghai Petrochemical Limited, PetroChina Company Limited PCCYF, Alibaba Group Holding Limited BABA and CMOC Group Limited CMCLF were all down between 1-2% in Hong Kong trading Wednesday. EV makers were also hit hard, as BYD Company Limited BYDDY fell 3% while Li Auto Inc. LI and NIO Inc. NIO dipped over 1% each.

The Chinese-language business daily Caixin reported Wednesday that real estate sales in China from the country’s 100 largest developers were down 29.9% year-on-year in September.

According to Caixin, a report by CRIC, one of the country’s largest real estate securities dealers, said that “purchasing power is still insufficient” and that confidence still remains very low among property investors despite recent efforts by the Chinese government to stimulate demand. The supply of property available in China’s 30 largest cities in September was 17% higher than the month before, according to CRIC.

While there was some rebound in sales off the August lows in China’s first and second-tier cities, additional incentives will need to be put in place in order to make sure the situation doesn’t worsen still, the report said.

According to CS Auctioneers Ltd., a property auction house, in Hong Kong foreclosed homes on sale in September have increased by 36% from a year-ago, which is the highest since the end of the subprime crisis in 2009. Property prices are now down by 17% since peaking two years ago, while new mortgages applying for an 80% or higher debt ratio have risen to over a third vs. 14% in 2021.

China SCE Group Holdings Ltd. tumbled 5% on the day, erasing all its morning gains after it announced a default on $1.8 billion of offshore bonds, which have now been suspended from trading. Meanwhile, China Evergrande Group EGRNF plunged 12% on profit-taking by traders after notching up speculative gains on trading resumption Tuesday. CIFI Holdings (Group) Co., Ltd., declined into loss-making territory for the second straight day, finishing down 1.7% after missing its latest earnings expectations Tuesday, reversing profits and now making losses.