Rating agency S&P Global said that Hong Kong's commercial real estate (CRE) sector is facing its worst downturn since the Asian financial crisis, and expected the sharpest pain to be felt by lower-tier or financially aggressive property companies, and the small banks most exposed to these entities.

S&P defined lower-tier property firms to be mostly landlords that own office and retail properties, while small developers are also likely to be under pressure if they have exposure to these office and retail properties.

Related NewsM Stanley: Mkt Mildly Lifts Financial Forecasts on HSBC HOLDINGS; Rating Overweight
Small and medium-sized banks may be underestimating their non-performing loans to the sector. Small and medium-sized banks' exposure to property-related loans, as a ratio to total loans, is higher than that of large banks in Hong Kong, which puts small and medium-sized banks at greater risk in the face of market volatility.

Hong Kong's CRE downturn could weigh on banks' asset quality, S&P added. However, S&P believed large banks to have manageable exposure to Hong Kong's CRE firms, and expected related credit losses to be contained, including HSBC and its same series HANG SENG BANK (00011.HK)  0.000 (0.000%)    Short selling $21.01M; Ratio 8.489%   , BOC HONG KONG (02388.HK)  0.000 (0.000%)    Short selling $35.84M; Ratio 16.612%   and Standard Chartered Hong Kong.
(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2025-02-10 16:25.)