[Asia Economy Reporter Park Hyungsoo] Amid growing concerns over the bankruptcy of real estate developer Evergrande Group, the Hong Kong stock market plunged as expectations arose that Chinese authorities would strengthen real estate regulations in Hong Kong.
The Hong Kong Hang Seng Index closed at 8,638.55 on the 20th, down 3.38% from the previous trading day.
Evergrande's stock price fell nearly 19% intraday, hitting its lowest level in 11 years since May 2010. It later recovered some losses, closing down 10.24%.
Other Hong Kong real estate companies such as New World, Shun Tak Holdings (SHKP), and Cheung Kong (CK) also saw their stock prices drop around 10%.
Chinese real estate developer Scenic Holdings, listed in Hong Kong, experienced a massive sell-off in the afternoon, causing its stock price to plummet 87%, leading to a trading halt.
Evergrande's total debt reached 1.95 trillion yuan (approximately 350 trillion won) as of the end of last year. The company is facing difficulties as Chinese authorities implement various measures to reduce financial risks and stabilize housing prices. Evergrande is expected to pay interest on its debt this week but is forecasted to fail to do so.
Chinese authorities have stated that major creditors should not expect debt repayment, and Evergrande is reportedly discussing the possibility of extending and expanding debt with creditor banks.
The possibility that the Chinese government will extend real estate regulations to the Hong Kong region is also believed to have affected the stock prices of other real estate companies. There are also reports that the Chinese government has notified Hong Kong developers that it will not tolerate "monopolistic behavior."
Major Asian stock markets, including those in Korea, China, and Japan, were closed for the Chuseok holiday.
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