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.
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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.
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“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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