More than $50BN of Hong Kong real estate stocks wiped off

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Weeks of pro-democracy protests in Hong Kong are battering shares in the city’s property developers, according to a report by CNN

Pushing its benchmark stock index closer to a bear market, about HKD446 billion ($56.9 billion) has been wiped off the market value of the nine largest Hong Kong real estate companies since April (data from Refinitiv). 

Meanwhile, the Hang Seng Properties Index, which tracks a bigger pool of real estate developers in Hong Kong, has plunged 19% since its recent peak in April. The broader Hang Seng index has fallen more than 16% during the same period. Both are at risk of falling into a bear market, which is defined as a drop of 20%.

With Hong Kong being the most expensive city in the world to buy a home, local residents and international investors alike are paying huge money for small apartments in the financial hub.

The market slide began earlier this year because of the impact of the trade war on Hong Kong’s economy and China’s slowdown. The city’s political turmoil has piled on the pressure. Some of Hong Kong’s biggest real estate tycoons called Tuesday for the protests to end.

Commenting on this event, Louis Wong, Director, Phillip Capital Management, said: “Recent protests have triggered huge selling pressure for developers’ stocks, because people are jittery about the escalating unrest and no one knows when it could end.”

“It has already dampened buyers mood on the property market,” he added. 

“Hong Kong’s economy only grew 0.6% in the second quarter from a year ago, the weakest rate in a decade. Escalating protests have made the outlook even more uncertain,” Wong said.

In addition, a weakening yuan could also crimp the buying power of mainland Chinese, who are the major buyers of Hong Kong properties. Several developers have postponed sales of luxury home projects this month.

“Developers are turning conservative about the market’s outlook. So they decided to pause and watch,” Wong said.

In the report, real estate agency Midland shared that sales of new homes have plunged 60% in the past three months, compared with the first quarter, partly due to lack of project launches. 

Meanwhile, the report also mentioned that developers Sun Hung Kai Properties (SUHJF) has lost HK$115 billion ($14.7 billion) in market value since its peak in April. That was equivalent to nearly one third of its market value back then.

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Written by

Cheryl Toh

Last updated on

August 15th 2019, 11:55 am

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