Real estate, hotel stocks take a hammering
Updated: 2008-10-09 07:25
(HK Edition)
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Real estate developers and hotel operators fell in Hong Kong trading yesterday on concerns that a rate cut indicates the economies of the city and the mainland are slowing and consumer spending power will weaken.
The Hang Seng Property Index, comprising six of Hong Kong's largest developers, dropped 8.59 percent. Shangri-La Asia Ltd, the region's largest luxury-hotel operator, slumped 19 percent to HK$8.
The Hong Kong Monetary Authority said yesterday that it was to cut its benchmark interest rate to 2.5 percent from 3.5 percent yesterday to help boost bank lending as the city's economy slows amid a global credit squeeze.
"Hong Kong cut the rate before the US moves, and this means the city's economy is worsening," said Mo Fan, an analyst at Soochow Asset Management Co in Shanghai. "That will hurt people's incomes and dampen their demand for property."
A slowing Hong Kong economy is an indicator that the mainland's economy is also cooling, Mo said. The mainland is Hong Kong's largest source of tourists, who may decide to stay home and save, should their incomes stall, he said.
Home sales in Hong Kong fell for a third straight month in September, dropping 22 percent to HK$18.7 billion, as the US banking crisis deepened, after dropping 59 percent in August, according to Land Registry figures released last week.
The number of residential units that changed hands in the city last month fell 31 percent from a year earlier to 6,075, according to the figures. The 43 percent drop in the benchmark Hang Seng Index this year may affect the luxury-housing market, Credit Suisse Group AG wrote in a report last week.
Sun Hung Kai Properties Ltd, Hong Kong's largest builder by market value, slipped 7 percent to HK$65. Billionaire Li Ka-shing's Cheung Kong (Holdings) Ltd, the second largest builder, fell 7.7 percent to HK$72.50.
China Overseas Land & Investment, active in both Hong Kong and on the mainland, slumped 11 percent to HK$8. Hang Lung Properties fell 9.6 percent to HK$15.12, Henderson Land Development dropped 11 percent to HK$27.70, and Sino Land declined 12 percent to HK$7.09.
Also, SOHO China Ltd, the biggest property developer in Beijing's central business district, fell in Hong Kong trading after announcing the closure of hotels near the Great Wall and in the southern province of Hainan.
The stock plunged 7.5 percent to HK$2.23. Beijing-based SOHO has lost 72 percent of its market value this year. The developer first sold shares to the public in October 2007 at HK$8.30 each.
SOHO will close the Commune by the Great Wall and the Boao Kempinski in Hainan after failing to win government approval to use the land for commercial purposes, according to a company filing yesterday evening after the stock market closed.
SOHO has ended management agreements with Key International Hotels Management Co, which isn't seeking compensation, and plans to operate the properties as serviced apartments, the developer said.
Bloomberg
(HK Edition 10/09/2008 page2)