SHANGHAI/SINGAPORE: Investors dumped China’s banking and real estate stocks on Thursday, fearing deepening trouble in the property sector would begin to hit the financial system as a wave of homebuyers refused to repay mortgage loans for delayed projects.
Bonds of Chinese developers were also sold off, as confidence in the sector, already wrecked by the Evergrande Group crisis, continues to wane.
Over the past few weeks, a growing number of homebuyers across China have collectively threatened to halt mortgage payments to banks until developers resume construction of pre-sold homes, according to official newspapers and social media.
The movement, which appears to be gaining traction, threatens to kill a nascent recovery in the property sector and could trigger government intervention.
“The event will likely spread, and it shows there is still a lot of froth in the real estate market,” said Yuan Yuwei, hedge fund manager at Water Wisdom Asset Management.
The CSI300 Bank index fell as much as 3.3%, hitting its lowest level since March 2020, while Hong Kong’s financial shares lost 1.5%. Chinese developers in both the markets also fell sharply.
The sectors’ bearishness weighed on the broader market. China’s benchmark index ended flat, while Hong Kong’s Hang Seng index closed 0.2% lower, despite strength in tech shares on Thursday.
“People are worried this may hurt bank loans and affect other, not-in-trouble projects,” said Steven Leung, executive director of institutional sales at brokerage UOB Kay Hian in Hong Kong.
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