NWD shares hammered as Hong Kong stocks slump on US rate concerns

The Hang Seng Index fell sharply on Tuesday due to concerns over interest rates following hawkish comments by a senior Federal Reserve official indicating the central bank was likely to keep them higher for longer, with property giant New World Development hammered and tumbling 5.3 percent.

Hong Kong led the equities decline in Asia, falling nearly 2.7 percent – or 478 points - to 17,331.22, the lowest since November 2022. 

All major sectors including tech, property and banking declined, with the developers badly hit by investors unloading property shares after Wall Street simmered under pressure from rising bond yields. 

New World Development (NWD) tumbled 5.3 percent after the company reported a weak full-year result last Friday. Other developers in Hong Kong also saw a sharp decline, with Henderson Land Development Co. down as much as 6.4 percent and Sun Hung Kai Properties Ltd. falling by 4.5 percent.

Going against the flow, heavily indebted Chinese property giant Evergrande saw its stock jump as it resumed trading in Hong Kong days after it announced its boss was under criminal investigation.

Hong Kong trading volumes are typically muted during China's Golden Week, analysts said, but the hawkish U.S. Federal Reserve stance on keeping interest rates higher for longer continues to weigh on the market.

The yield on benchmark 10-year U.S. notes hit their highest since 2007.

"If we don't get some good news, it's going to be a bad week," said Steven Leung, director of institutional sales at UOB Kay Hian in Hong Kong, adding that markets generally are very nervous about U.S. rates. 

Tokyo ended down 1.6 percent while Sydney, Taipei, Bangkok and Singapore were also well in the red. Manila and Kuala Lumpur were flat, with Jakarta the sole advancer.

Markets in mainland China and South Korea were closed for holidays.

Hong Kong developers are facing a challenging market, as rising interest rates have dimmed buyer appetite. The Centa-City Leading Index, an indicator of secondary private residential property prices in Hong Kong, fell for a seventh week between Sept. 18-24 to the lowest since January, according to data compiled by Bloomberg.

UOB-Kay Hian Holdings Ltd. downgraded the NWD to hold to factor in the slower-than-expected sales progress and the lower profit margin for the properties business in Hong Kong. CLSA Ltd. also downgraded New World to sell due to the dividend cut.

Separately, the CGS-CIMB Securities estimated NWD's net debt to equity to fall continually from the current level to 40 percent at the end of the financial year 2026, taking into account potential open market purchase of outstanding debt below book value and cash inflow from development property sales and investment properties.

It also expected NWD to maintain an underlying payout ratio of 50 to 70 percent, excluding the potential special dividend per share that may arise from the disposal of other noncore assets in the future.

CGS-CIMB maintained its 'Add' call on NWD, with a slashed target price of HK$19.3 from HK$20.8.