Beijing is moving to take measures to prevent the crisis of the country’s second largest real estate developer, China Evergrande Group, from transforming in a Chinese “Lehman moment”, which means the collapse of the American bank Lehman Brothers that sparked the global financial crisis, but some Chinese banks could be victims of the Evergrande default, which is starting to weigh on global markets, according to analysts of Citigroup.
“Policy makers are likely to support minimal systemic risk prevention to buy time until debt risks are resolved and push forward a marginal easing of the overall credit environment,” they wrote. in one note analysts including Judy Chang.
Growing investor concerns about Evergrande and a crackdown on China’s real estate sector sparked a chain reaction among risky global assets this week, trapping even stocks with less links to China.
Last week, Evergrande released a negative report on its financial health, saying it was facing enormous liquidity pressures and had hired consultants to look into what may be one of the largest debt restructuring in the country.
Evergrande has more than $ 300 billion in liabilities, half of which are payments that include arrears to contractors.
Citigroup’s analysis of banks’ exposure to developer high-risk loans indicates that credit risk is higher for China Minsheng Banking Corp., Ping An Bank Co., and China Everbright Bank Co.
Analysts wrote that Bank of Nanjing Co, Chongqing Rural Commercial Bank Co and China Postal Savings Bank are less exposed and “we will see any decline as an opportunity to buy quality stocks.”
“There is little chance of systemic risk from Evergrande,” says Shujin Chen, an analyst at Jefferies Financial Group, Inc., and advises investors to buy bank stock. in case of dips, and among Chen’s top picks in the industry are China Construction Bank Corp and Ningbo Co, as I mentioned in a note.
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