HSBC Honks The Air Horn On Chinese Realty Market

HSBC sounds alarm over Chinese developer defaults.

COVID-19. Lockdowns. A beleaguered realty market. And further losses on the anvil, as warned by HSBC Holdings Plc, China’s biggest foreign bank - these are some of the latest postcards arriving in from the mainland. 

What Up: HSBC’s Chief Financial Officer, Ewen Stevenson is already padding up for further provisions in 2022. The bank’s already taken USD160 million as its provision against Chinese commercial realty in Q1, over and above the USD450 million provisioned in the quarter before.

Why HSBC’s pressing the panic button

📌 HSBC’s total exposure to China’s realty sector stood at USD21.3 billion as of 31st December, 2021. In the meantime, Chinese real estate giants are facing a yawning liquidity gap and morose sales figures.

📌 The 2020 crackdown to curb housing market speculation and borrowing has apparently backfired. A minimum of 17 companies have already defaulted on their offshore bonds ever since.

Future Imperfect

HSBC’s Stevenson had a sobering prediction, i.e. growth will be hit in China due to lockdowns. Indeed, economists do not see beyond 5% GDP growth in 2022, as China’s housing market stays in limbo with poor sentiments and plunging sales.

HSBC had earlier been scaling up investments and hiring in China as part of its dream Asian triumph, which was tapping an open financial market and enjoying its endless opportunities. 

💭 However, if HSBC has anything to say to the powers-that-be today, we bet they’ll fall back on William Butler Yeats' - Tread softly, for you tread on my dreams. 

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