Real estate in China
The ongoing downward trend of real estate prices is casting shadow over performance of commercial banks on the Chinese mainland, although this is nowhere near as marked as in the U.S. credit crisis.
Shares of China Merchants Bank slumped more than 27% over the past month, while Industrial and Commercial Bank of China dropped 7% during the same period.
David Cui, head of China equity research & strategy of Merrill Lynch, was quoted by China Daily as saying: ‘We strongly urge investors to avoid the financial and property sectors.’
So far, bank profitability has been largely locked in by the spread between the lending and deposit rates. The latest reduction in interest rates should make little difference to banks’ earnings, because both the lending and deposit rates were reduced by the same amount.
However, few economists expected the cut of 27 basis points in the lending rate to encourage many more people to borrow.
More HERE.
Source: China View