HK banks told to report Evergrande exposure

The Hong Kong Monetary Authority is said to have requested banks to report their exposure to China Evergrande (3333) related assets, although the de facto central bank yesterday stressed the risks are manageable.

The report came as the Shenzhen government said it is investigating the developer’s wealth management products.

Hong Kong lenders last week were given 24 hours to respond on their financial commitments to China’s most indebted developer, both in terms of lending and derivatives, sources told Bloomberg .

It’s at least the second time in recent months the authority took an interest in how banks are exposed to Evergrande as financial markets are bracing for a potential collapse of the developer, which is buckling under more than US$300 billion (HK$2.34 trillion) in liabilities.

The deputy chief executive of the Hong Kong Monetary Authority Arthur Yuen Kwok-hang said yesterday that the risks to Hong Kong banks from heavily indebted Chinese property developers are manageable.

“Both the industry and the media have been focusing a lot of attention on highly-leveraged borrowers, in particular, some of the developers in mainland China. On that one, both the industry and ourselves have been paying a lot of attention to industry sectors that are under relatively greater stress in the past few years, so our banking system’s exposure to these highly leveraged borrowers is not that high.” Yuen said.

This came after China’s central bank vowed to protect consumers exposed to the housing market on Monday and injected more cash into the banking system as the Shenzhen government began investigating the wealth management unit of ailing developer Evergrande, the clearest sign yet the authorities could move to contain contagion risks.

In a letter to investors seen by Reuters, the Shenzhen Financial Regulatory Bureau said “relevant departments of the Shenzhen government have gathered public opinions about Evergrande Wealth and are launching a thorough investigation into related issues of the company.”

The builder faces a US$45 million coupon today for a dollar bond, after giving no sign last week of having met a separate US$83.5 million coupon payment on other securities.

Separately, Sunac China’s (1918) shares surged 14.81 percent yesterday after the Chinese developer denied submitting a request for policy support from a city government and said business is normal.

The Beijing-based builder said a letter written by a local executive for verbal communication with officials in eastern Shaoxing city last week was only a draft that was “accidentally” sent to a chat group outside the company.

It wasn’t submitted to the government and the group’s operations are healthy, Sunac said in a statement.

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