(Bloomberg) — Hong Kong shares fell to their lowest since early November, as concerns over a major Chinese property developer’s debt woes and rising government scrutiny on Macau casino operators drove investors to sell.
The Hang Seng Index closed 1.5% lower, taking declines into a fourth day, with the real estate sector leading the losses. Mainland developer Country Garden Holdings Co. and gaming stock Sands China Ltd. were among the worst performers in the gauge with a plunge of at least 7.2%.
Worries that other Chinese developers may run into similar financial troubles as China Evergrande Group were intensified after a unit of the Guangzhou-based firm said its onshore bonds were suspended from trading on Thursday. Traders were also assessing the future prospects for casinos in Macau after their record slump a day ago as Beijing moved to tighten grips on the operators.
“For the property sector our view is that we know that these equities, these bonds, are super cheap, but we don’t know whether the risk has completely receded or have been priced in fairly,” Julia Wang, an executive director and global market strategist at JPMorgan Private Bank, told Bloomberg Television. “This is a sector we would be very cautious of right now.”
A Bloomberg index of the six casino operators in the gambling enclave slumped 5.7%, adding to the record 23% plunge Wednesday.
The government is looking at appointing representatives to “supervise” the casino operators as well as boosting local shareholdings and tightening controls on the distribution of dividends. The regulatory crackdown comes after years of slowing growth and the Covid-19 pandemic, which had brought the city to a virtual standstill.
“The policy steer is fairly vague, in our view, but the reference to social responsibility is sending chills down the spines of investors,” Jennifer Song, senior equity analyst at Morningstar Inc., said in a report. Coming hot on the heels of the crackdowns on the technology and education sectors, the focus on casinos “represents a major new source of uncertainty,” she said.
Traders may be adopting different strategies for individual casino stocks depending on their prospects for renewing gaming licenses, according to Noah Hudson, an analyst at Guotai Junan International Holdings Ltd.
Galaxy Entertainment Group Ltd. rebounded as much as 4.5%, before ending the session slightly lower as a selloff in Greater China markets intensified in afternoon trading. It plummeted 20% a day earlier.
The Hang Seng Tech Index also slid for a fourth session, closing 1% lower. It has lost 7.6% so far this week, set to snap a three-week winning streak.
(Updates throughout.)
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