The Hong Kong stock exchange tumbled Monday over fears of a contagion from the potential collapse of Chinese real estate giant Evergrande as it struggles under a mountain of debt.
The firm, one of the country's biggest developers, has warned it may not be able to repay loans and interest on its bonds -- totalling more than $300 billion -- and could go under.
With some payments due Monday and Thursday, traders are keeping a nervous eye on the crisis, which has fanned fears of a domestic and international contagion.
Analysts say a lack of comment from Beijing and a holiday in China are only adding to the uncertainty.
Evergrande was the biggest loser in the dip on the Hong Kong stock exchange, where the property mammoth is listed. Its shares crashed 17 percent, down around 90 percent from the start of the year.
Other property firms were also in the firing line, with Henderson Land losing 12.3 percent and New World Development 11 percent lower. Sun Hung Kai Properties shed nine percent.
Meanwhile, insurance giant Ping An lost around eight percent. China Minsheng Bank, Agricultural Bank of China and Industrial and Commercial Bank of China were all down around five percent each.
The dash for the exit left the Hang Seng Index down more than four percent in the morning session.
- Dread among investors -
Analyst Philip Tse, of BOCOM International Holdings, warned "there will be further downside" unless leaders give a clear signal on Evergrande or eases up on its clampdown on the real estate sector, Tse said.
The giant debt mountain helped drive Evergrande's voracious expansion, which started with a 1990s property boom and lasted until Beijing moved to trim leveraged growth in the sector by introducing curbs in 2020.
And the problem has been exacerbated by Beijing's crackdown on developers as it looked to force them to offload debt, introducing "three red lines" to curb leverage last year, while it introduced a ban on selling properties before they are completed -- a major part of Evergrande's business model.
Experts say the firm has more than a million units pre-paid by customers yet to be built, adding to the sense of dread among Chinese investors, many of them first-time buyers.
The company last week admitted it is under "tremendous pressure" and may not be able to meet its liabilities.
Concern is building among unpaid suppliers -- some of whom say they are owed upwards of $1 million -- as well as investors relying on returns to pay off their own loans and staff salaries.
Still, while leaders are looking to curb excessive risk-taking, there is a general belief they will work to prevent the issue from becoming unmanageable and driving a hole through the already stuttering economy.
"The central government's priority of social stability makes restructuring likely with haircuts for debt holders, but spillovers to other listed property developers means there will likely be a real economy impact on the real estate sector," said National Australia Bank's Tapas Strickland.
"To what extent Evergrande slows the growth momentum remains unclear."
NATIONAL AUSTRALIA BANK
PING AN INSURANCE GROUP COMPANY OF CHINA
AGRICULTURAL BANK OF CHINA