Caixin
Jan 05, 2021 07:05 PM
FINANCE

Multiple Chinese Bank Stocks Plummet as New Rules Bite

What’s new: Multiple Chinese banks saw their share prices continue to plunge on Tuesday as investors fret over new regulations on property lending that would likely dampen lenders’ earnings.

Shanghai-listed China Merchants Bank Co. Ltd. closed down 2.29% on Tuesday. And shares of Ping An Bank Co. Ltd. were down 2.31% at their close. Bank of Chengdu Co. Ltd. lost 3.98%, while Bank of Qingdao Co. Ltd. was down 2.46%, and Industrial Bank Co. Ltd. shed 4.02%.

The five banks are among the lenders that didn’t meet standards required by a new bank loan management mechanism imposed by China’s central bank and top banking regulator, according to banking analysts. The new mechanism caps all domestic banks’ outstanding property loans at certain proportions of total yuan loans, as well as limiting outstanding mortgages to certain ratios of the total loans.

What’s the background: The caps for banks’ property loans, which were released Thursday, are part of the government’s ongoing efforts to cool the overheated property sector. Economists with Nomura International (Hong Kong) Ltd. said the rapid rise of property sector debt could trigger a systemic financial crisis if property prices experience a sustained decline.

However, some bankers complained that the restrictions on property lending, which has served as a major revenue stream, added a financial burden to their businesses this year as they face pressure from the uncertainties created by the Covid-19 pandemic.

Related: China Caps Bank Loans for Real Estate, Homebuyers to Curb Systemic Risk

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full Caixin article in Chinese, click here.

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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