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China Stocks Plunge as Homebuyers Refuse to Repay Loans

The CSI300 Bank index fell as much as 3.3% in early trading, its lowest since March 2020, hitting banks and developers as the ‘Stop Mortgage Repayment’ protest spreads to over 100 projects


Funds and investors with a focus on Asia have been caught up – alongside millions of homebuyers – in China's long-running property sector crisis.
China's "stop mortgage repayment" movement has spread to more than 300 property projects across several provinces, creating a potential nightmare for banks and the government. Investors and millions of homebuyers have been caught in the crisis. This file photo shows buildings in Beijing at sunset (Reuters).

 

Chinese real estate and bank stocks plunged on Thursday amid fears that debt troubles in the property sector will hit lenders as more homebuyers threatened to halt mortgage payments.

A growing number of homebuyers have in the past few weeks threatened to stop making mortgage payments if property developers do not resume construction of pre-sold homes, according to official media.

The “stop mortgage repayment” movement has spread to more than 100 property projects across several Chinese provinces, the Securities Times reported on Thursday.
 

Also on AF: China Property Protests Threaten $220 Billion Hit For Banks

 
The CSI300 Bank index fell as much as 3.3% in early trading, hitting its lowest level since March 2020.

Chinese developers listed on the mainland and Hong Kong also slumped.

 

Fierce Sell-Offs

“People are worried this may hurt bank loans and affect others, not-in-trouble projects,” Steven Leung, executive director of institutional sales at brokerage UOB Kay Hian in Hong Kong, said.

Smaller lenders suffered fierce sell-offs.

China Merchants Bank dropped as much as 6.3%, while Bank of Chengdu lost 5% earlier in the day.
 

Also on AF: Two China Provinces to Repay Depositors After Rare Protests

 
“China’s property downturn may finally adversely affect onshore financial institutions after hitting the offshore high-yield dollar bond market,” Nomura chief China economist Ting Lu wrote.

“A disorderly deleveraging may not only lead to a credit crunch for developers and massive defaults in offshore dollar bond markets, but also rising non-performing loans for banks, which sit at the centre of China’s financial system.”

 

  • Reuters with additional editing by Jim Pollard

 

 

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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.

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