Chinese and Hong Kong stocks showed mixed performance on Monday as a late rally in technology shares helped offset concerns over weak economic data. According to Reuters, the blue-chip CSI300 index recouped early losses to end 0.4% higher, while the Shanghai Composite Index rose 34 points, or 0.86% to 3,986. The Hang Seng Index inched down 17 points, or 0.1% to 25,566 on turnover of HK$314.82 billion. The tech sector emerged as the primary driver, with the tech index rising 14 points, or 0.3% to 4,619 and the China enterprises index gaining 22 points, or 0.3% to 8,513. The combined turnover of stocks covered by the main Shanghai and Shenzhen indices reached ₹2.13 trillion, up from ₹2.1 trillion on Friday.
Market sentiment received a significant blow from new measures to reform China's housing presale system, triggering a sharp selloff in property shares. According to Reuters, an index tracking mainland-listed real estate companies fell 1.4%, while Hong Kong's Hang Seng Mainland Properties Index dropped nearly 6%. The proposed overhaul threatens to disrupt a financing model that has long been central to China's property market, with presales still representing 68% of new-home sales by floor space in 2025. The changes could intensify pressure on private developers, which have already faced severe liquidity constraints following the property sector's prolonged downturn, and may also make banks more inclined to favour state-owned developers, potentially widening the financing gap between state-backed and private companies. Gavekal Dragonomics analyst Zhang Xiaoxi predicted that "the effort to shrink the presales system will lead to a decline in housing starts" and expects "more private-sector developers will exit the market" as banks favour state-owned developers.
Chinese property stocks fell sharply on Monday after new housing rules restricted the use of pre-sales to fund projects, raising concerns that developers could face longer cash-conversion cycles even as Beijing seeks to restore confidence in the struggling housing market. According to Investing.com, China Resources Land shares fell 7.7% to HK$30.62, China Jinmao fell 14.7% to HK$1.34, Greentown China dropped 12.8%, China Overseas Land & Investment fell 6.4%, and China Overseas Property declined 3%. The new rules, issued by the People's Bank of China and the National Financial Regulatory Administration, require mortgages for new homes to be issued only after projects are completed, while local governments are being encouraged to promote sales of completed homes. The measures are intended to reduce delivery risks and address problems that emerged after China's presale-driven housing model came under severe pressure following the 2021 property downturn. For developers, the change could disrupt a crucial part of the industry's traditional financing model, as they have long sold apartments before completion and used buyers' deposits and mortgage-backed proceeds to fund construction and working capital.
The new regulatory changes have created significant concerns about developer cash flow and investment capacity. According to Reuters, China's government land sales revenue fell 30.8% from a year earlier over the first seven months of 2026, while nationwide property development investment dropped 19.2%. A developer executive told Reuters that "forty percent of cashflow will be unavailable for business use, which means a 40% reduction of investment capacity in the near term", citing official data showing presales and mortgages account for 40% of development capital. State-backed developers were among the biggest losers, with Greentown China (3900.HK) shedding 17.6%, while China Jinmao (0817.HK) and Yuexiu Property (0123.HK) lost 15.9% and 13.6%, respectively. Larger state-owned players China Resources Land (1109.HK) and China Overseas Land & Investment (0688.HK) declined more than 9%, while private-sector rivals Longfor Group (0960.HK) and Seazen (1030.HK) fell 7.1% and 5.8%, respectively. The new rules also seek to reduce homebuyers' debt by extending the maximum term for personal mortgages to 40 years from 30 years, which could raise risk exposure of lenders and make banks more selective in issuing development loans.
Technology shares emerged as the primary driver of market gains, with major sectors posting significant increases despite broader market weakness. The CSI Cloud Computing 50 Index gained 4%, the CSI Big Data Industry Index advanced 3.5%, the CSI Integrated Circuits Index climbed 3% and the CSI Artificial Intelligence Index strengthened 2.8%. Shares in sectors of short drama and film production, liquid-cooled servers, consumer electronics and computing power leasing led gains, while precious metals, photovoltaic equipment, innovative pharmaceuticals and agriculture sectors were among top losers. The tech rally helped ease economic concerns after official data showed China's factory activity improved in August on stronger demand, though it remained in contraction for a second consecutive month.
