HONG KONG : Chinese banks are set to take a hit to asset quality from mortgage business as growing numbers of homebuyers threaten to stop loan repayments to protest against unfinished apartments, analysts said.
Chinese investors dumped banking and real estate stocks on Thursday, fearing deepening trouble in the property sector would begin to hit the financial system. The CSI300 Bank index fell as much as 3.3 per cent. "A primary concern is if this snub spreads too quickly and more home buyers follow suit only because their projects are going slowly, or simply out of a pessimistic outlook for the property sector," said Shujin Chen, equity analyst at Jefferies.
The four major state banks, as well as Postal Savings Bank of China, China Merchants Bank and Industrial Bank, are the financial institutions with the biggest mortgage exposure, according to Jefferies.