Banks, developers slump on loan curbs

Business | Stella Zhai and agencies 30 Sep 2020

Shares of mainland banks and developers slumped in Hong Kong on news that regulators asked some major lenders to cap the new mortgage lending scale.

Some major banks have been required to control the proportion of property-related loans within 30 percent of their total new loans, with no official guidance, while those facing a tight personal mortgage quota have encouraged customers to repay their mortgages earlier, the mainland 21st Century Business Herald reported citing sources.

This came after China's household leverage ratio soared to a record high by the end of June, prodded by a jump in mortgages as the government allowed real estate to support the economy.

Blue-chip bank stocks all hit their lowest in more than 52 weeks, with Bank of China (3988) falling to a nearly-nine-year low before it pared the loss, closing 1.65 percent lower at HK$2.39. China Resources Land (1109) fell 2.51 percent to HK$32.95. The benchmark Hang Seng Index dropped 0.85 percent to 23,275 points.

In other news, China Evergrande (3333) said investors holding equity stakes worth about 86.3 billion yuan (HK$98.1 billion) agreed to keep their shares and not require the company to buy them out, allowing the indebted developer to avoid billions in potential repayments.

The group of investors represents the majority of the 130 billion yuan in shares held by strategic investors in Evergrande's Hengda Real Estate unit, who could demand repayment in January under certain conditions, Evergrande said.

Also, the mainland government is evaluating the risk posed by the group and considering support measures, such as directing state-owned companies to take stakes in Evergrande or giving a green light for its proposed listing of an electric-vehicle unit in China, Bloomberg reported citing sources.

DBS analysts also expect that mainland home prices will rise by as much as 10 percent in 2020 and that the government will give developers more time to improve their debt ratios.

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