How long can Hong Kong real estate resist Chinese stock mayhem?

How long can Hong Kong real estate resist Chinese stock mayhem?

Government measures lasted just three weeks, now how long can the Hong Kong property market stand up to Chinese share volatility?

Summary:

  • Shares in China experienced their biggest fall in over 8 years yesterday, losing 8.5%
  • Government measures to prop up the market collapsed after just three weeks
  • The Hong Kong property market is expected to be hit hard by the share fallout

How will the Hong Kong property market react to a cataclysmic moment in the region’s recent economic history?

Shares in China crashed almost 8.5% in one day in the biggest daily drop in eight years.

Earlier this month property investors were warned that if Chinese stock exchanges continued to be volatile, the high-performing Hong Kong real estate market would start to feel the effect.

Back on July 8th, the Shanghai Composite Index fell more than 5% and now it appears the government’s measures to prop up the market have stalled any further fall for just three weeks.

Elsewhere the Hang Seng Index dropped 3.09%, with none of the 50 stocks escaping the problems, the H-share index lost 3.84%, and the Shenzhen Composite Index sank 7%.

The China Securities Regulatory Commission said it was investigating two more firms that ran stock-trading platforms after warning it would step up its crackdown on illicit selling by major stakeholders, insider trading and price manipulation.

Even if no wrongdoing is uncovered, retail investors appear to have lost confidence as even safe sectors such as state-owned banks and insurer fell yesterday.

The sell-off will be felt worldwide, with US stocks opening lower yesterday and European equities heading for a fifth consecutive fall, but it may be the value of Hong Kong real estate that feels the fallout most acutely.

The bursting of the bubble has been feared since January when a decline in the Hong Kong property market was highlighted as the major economic fear in a Moody’s Asia-Pacific outlook and now, this may be expedited as owners rush to sell off their assets.

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