China’s bank and property stocks rose after regulators sought to defuse a growing consumer boycott of mortgage payments by urging banks to increase lending to developers so they can complete unfinished housing projects.
China is looking to stem the protests that have flared up at 100 housing projects across 50 cities, threatening to spread the property sector crisis to the banking system. Regulators met with banks last week to discuss the boycotts, while state media have cited analysts warning that the stability of the financial system could be hurt if more home buyers follow suit.
Bank stocks rallied on the report, as the CSI 300 Bank Index jumped 1.3%, the first gain in nine sessions. Shares of Chinese lenders dipped 7.7% last week, the biggest decline in more than four years. A gauge of property shares rose 3.6% Monday. “In a worst-case scenario, the issue could trigger systemic financial risk and social instability, given housing’s role as a bedrock of the broader financial system,” Gabriel Wildau, a managing director at global business advisory firm Teneo, wrote in a note July 15. “But our base case is that regulators will succeed in containing the crisis by strong-arming state-owned banks into supporting troubled developers so that they can complete stalled projects.