Beijing is moving to take measures to prevent the crisis of the country’s second-largest real estate developer, China Evergrande Group, from turning into a Chinese “Lehman moment”, meaning the collapse of the American Lehman Brothers bank that sparked the global financial crisis, but some Chinese banks may fall victim to Evergrande default, which It is beginning to weigh on global markets, according to analysts at Citigroup.
“Policy makers are likely to support minimal systemic risk prevention to buy time until debt risks are resolved, and push forward marginal easing of the overall credit environment,” analysts including Judy Chang wrote in a note.
Investors are increasingly concerned about Evergrande The crackdown on China’s real estate sector has cascaded a chain reaction across risky global assets this week, even trapping stocks with fewer links to China.
Last week, Evergrande released a downbeat report on its financial health, saying it was facing massive liquidity pressures and had hired advisors to look into what could be one of the largest debt restructurings in the country.
Evergrande has more than $300 billion in liabilities, half of which include payments to contractors.
Citigroup’s analysis of banks’ exposure to high-risk developer loans indicates that credit risk is highest 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 pullback as a boosting opportunity to buy quality stocks.”
“There is little chance of systemic risk from Evergrande,” Shujin Chen, an analyst at Jefferies Financial Group, Inc., sees it, and advises investors to buy bank shares on dips, and among Chen’s top picks in the sector are China Construction Bank Corp and Ningbo Co, according to what I mentioned it in a note.
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