Sept 20 (Reuters) - Hong Kong shares closed at their lowest
level in 11 months and the offshore yuan and Hong Kong dollar
weakened on Monday, as a plunge in beleaguered property
developer China Evergrande Group led other stocks in
the sector lower.
The benchmark Hang Seng Index closed down 3.34%, its
worst percentage decline in nearly two months, and its lowest
close since late-October, dragged down by the property sector.
The blue-chip developer index lost 6.7% and a broad
index tracking property and construction stocks fell
Mainland Chinese stock markets are closed for the mid-autumn
festival, although FTSE China futures traded in Singapore
"Market sentiment is fragile in Hong Kong at the moment,"
said Dickie Wong, research director at Kingston Securities.
He said the declines were due to growing risks of defaults
at Chinese property developers and concerns that Beijing's
"common prosperity" agenda would also include Hong Kong real
estate names, though he said the latter was likely an
Beijing has told Hong Kong's powerful property tycoons to do
more to help solve the financial hub's potentially destabilising
housing shortage, Reuters reported last week.
Evergrande was once again one of the largest decliners,
closing down 10.2% having dropped as much as 19% at one point to
a fresh 11-year low. The stock has fallen more than 85% so far
The developer has been scrambling to raise funds to pay its
many lenders, suppliers and investors, with regulators warning
that its $305 billion of liabilities could spark broader risks
to the country's financial system if not stabilised.
The company is due to pay $83.5 million interest on Thursday
for its March 2022 bond.
Evergrande's woes also hurt bank stocks.
Reuters reported last week that Agricultural Bank of China,
had made some loan loss provisions for
part of its exposure to Evergrande, while China Minsheng Banking
Corp and China CITIC Bank Corp Ltd
were considering rolling over some of their near-term
debt obligations, citing sources with knowledge of the matter.
Ag Bank's Hong Kong shares finished down 3.3%, Minsheng
Bank's lost 5.9% and CITIC Bank's shed 5.1%.
The fallout also added to pressure to the yuan, which fell
to a three-week low of 6.4848 per dollar in offshore trade
"I think it's one of the triggering points," said Mizuho
analyst Ken Cheung, who said market instability generated by
Evergrande added to the dollar's allure along with recent weak
economic data in China and expectations of U.S. tapering.
"With onshore markets on holidays, the PBOC may have less
guidance over the renminbi," he added.
The Hong Kong dollar dropped to 7.7881 a dollar,
also its lowest level in three weeks.
(Reporting by Alun John, additional reporting by Tom Westbrook;
Editing by Sam Holmes and Uttaresh.V)