Tough Road Ahead for Chinese Exporters
Hong Kong shares experienced a decline on Wednesday due to concerns over a challenging export climate for Chinese exporters and ongoing troubles in the property market. The Hang Seng Index began the day with a rise but ultimately ended 0.8% lower at 17,195.84.
According to the South China Morning Post, Chinese exporters are facing difficulties in increasing sales overseas, particularly in the US. In August, Chinese exports fell 8.8% compared to the previous year, with shipments to the US down 9.5% for the 13th consecutive month. As a result, many Chinese exporters are considering establishing operations in other Southeast Asian countries.
The International Monetary Fund (IMF) warned that ongoing disruptions to global trade, driven by political tensions arising from the war in Ukraine and changing relations between the US and China, could lead to price volatility in imports and exports, food shortages, and increased costs for implementing green energy solutions.
Impact on Stocks and EV Makers
Shares of exporter-related companies, including Fosun International Limited (FOSUF), Sinopec Shanghai Petrochemical Limited , PetroChina Company Limited (PCCYF), Alibaba Group Holding Limited (BABA), and CMOC Group Limited (CMCLF), all experienced declines of 1-2% in Hong Kong trading. Electric vehicle manufacturers were also affected, with BYD Company Limited (BYDDY) falling by 3%, while Li Auto Inc. (LI) and NIO Inc. (NIO) both dipped over 1%.
Real Estate Sales and Housing Market Concerns
China’s real estate sales experienced a significant decline in September, with a 29.9% year-on-year decrease among the country’s 100 largest developers, according to the Chinese-language business daily Caixin. The report by CRIC, one of China’s largest real estate securities dealers, highlighted insufficient purchasing power and low investor confidence, despite the Chinese government’s efforts to stimulate demand. The supply of available properties in China’s 30 largest cities increased by 17% compared to the previous month.
Additional incentives will be necessary to prevent the situation from worsening, as sales in China’s first and second-tier cities have only experienced a slight rebound from the lows in August, according to the report.
In Hong Kong, foreclosed homes on sale in September have increased by 36% compared to the previous year, marking the highest level since the end of the subprime crisis in 2009. Property prices have declined by 17% since reaching a peak two years ago, while new mortgages with a debt ratio of 80% or higher have risen to over a third, compared to 14% in 2021, according to CS Auctioneers Ltd.
Default and Profit-Taking Impact Stocks
China SCE Group Holdings Ltd. experienced a 5% decline on the day after announcing a default on $1.8 billion of offshore bonds, resulting in the suspension of trading for those bonds. Meanwhile, profit-taking by traders caused China Evergrande Group (EGRNF) to drop by 12% after speculative gains following trading resumption on Tuesday. Additionally, CIFI Holdings (Group) Co., Ltd. recorded a second consecutive day of losses, declining by 1.7% after missing earnings expectations and transitioning from profit to loss.