Hong Kong Property Tycoons Take $6.7 Billion Hit on China Fears

(Bloomberg) -- The families behind Hong Kong’s four top property giants saw $6.7 billion wiped off the value of their assets on Monday as investors headed for the exit, fearful that Beijing will order housing price controls.

Property developers led the losses on the benchmark Hang Seng Index on Monday with the so-called Big Four owned by the city’s most powerful tycoons suffering some of the biggest declines. Contagion fears from the liquidity crisis at China Evergrande Group added to the selling pressure. 

Lee Shau Kee’s Henderson Land Development Co. shares tumbled 13%, the biggest decline since 2008, while the Cheng family’s New World Development Ltd. saw its shares drop the most in 7 years. Li Ka-shing’s CK Asset Holdings Ltd. and Sun Hung Kai Properties Ltd., owned by the Kwok family, also plunged.

The rout was triggered by a Reuters report on Friday that said Chinese officials told Hong Kong developers to redirect resources to help solve a housing shortage. That spurred fears that President Xi Jinping’s “Common Prosperity” policy agenda, which has swept through large swathes of industries on the mainland, is finally stretching into the city’s property companies and the source of the tycoons’ wealth.

“People may be worried about whether they have to take up extra responsibility to build more subsidized housing,” said Philip Tse, head of Hong Kong and China property research Bocom International.

Investors are already unnerved by the regulatory onslaught from Beijing into technology, education and casino firms as Xi sought to tackle social inequality. Hong Kong’s property prices, the most expensive in the world, have been the cause for social unrest and were blamed by Chinese officials for contributing to the 2019 pro-democracy protests.

In July, China’s top official to Hong Kong, Xia Baolong, set a goal for the city to eliminate its notoriously small homes by 2049. In March, Chinese Vice Premier Han Zheng bemoaned a housing crisis. Citing an unidentified person close to mainland officials, Reuters reported that China would no longer accept monopolistic behavior.

The main concern is that Beijing will ask the Hong Kong government to impose price caps and purchase restrictions, said Raymond Cheng, head of China and Hong Kong property research at CGS-CIMB Securities. However, the chance of Hong Kong adopting the same housing policies as the mainland is low, given that the government reiterated the “One Country Two Systems” principle, Cheng wrote in a note.

Hong Kong Chief Executive Carrie Lam is set to deliver her 2021 policy address on October 6.

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