By John Cheng, Bloomberg Markets Live reporter and strategist
China’s battered banking stocks will likely decline further as they are summoned by local authorities to support the country’s struggling property developers, analysts say.
Latest policy moves to boost lending to developers — including via the use of unsecured loans — have only strengthened the conviction that lenders’ shares may weaken further. Even record-low valuations have not been enough to lure investors, with the CSI 300 Banks Index slumping to a one-year low amid worries over shrinking margins.
“Unfortunately, we think banks may have to do more national service this time to stabilize the growth expectations,” said Xiadong Bao, a fund manager at Edmond de Rothschild Asset Management in Paris. “We think those headwinds may persist given the challenging macro condition and weak consumer sentiment. It is difficult to have a positive view before the credit cycle comes back.”
China’s banks face a conundrum of balancing support for the property sector and the economy with the need to manage their already depressed earnings. The sector’s net interest margins slumped to a record low of 1.73% as…
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