Hong Kong stocks fell to a two-week low amid concern rising borrowing costs will dent the outlook for the citys property market.
The Hang Seng Index lost 0.3 percent as of 10:06 a.m. local time. A gauge of real estate companies declined the most among industry groups as Sun Hung Kai Properties Ltd. and New World Development Co. slid more than 1 percent. Sands China Ltd. paced a retreat by casino operators. The Shanghai Composite Index slipped 0.1 percent to extend a weekly drop.
A bull-market run in Hong Kong is tiring as an improving U.S. economy scotches Brexit-fueled optimism that higher borrowing costs were a remote prospect. Traders are pricing in a 42 percent probability of of U.S. rate increase next month, and a nearly 65 percent chance the central bank will act by December. Hong Kongs currency peg with the greenback makes the city vulnerable to U.S. monetary policy.
“Markets have gone up quite significantly and some investors will take that as an excuse to take profits, ” said Yen Chiu, a Hong Kong-based trader at China Securities International Finance Holding Co. “Some big property names are going down.”
The Hang Seng Index last traded at 22,824.79. The Hang Seng China Enterprises Index slid 0.7 percent, after falling 0.6 percent last week.
Mondays losses pared the rebound by the Hang Seng Index since this years low to 24 percent. Hong Kong remains caught in a “pincer” between Chinas structural slowdown and the return of U.S. borrowing costs to more normal levels, according to BNP Paribas SA.
Higher borrowing cost would mean a heavier burden on mortgage loans, said Iris Pang, senior economist for Greater China at Natixis SA in Hong Kong. This may reduce the demand for property investments.
China may limit monetary easing after industrial profits climbed, China International Capital Corp. said in a report. The nations industrial companies reported a 11 percent jump in profit in July, up from Junes 5.1 percent increase, official data showed on the weekend.
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