China Stress Tests May Be `Negative' for Metals, China Future's Fang Says
China’s order of additional stress tests for banks to determine the impact of residential property prices sliding by as much as 60 percent may have a “negative impact” on the metals market, said Fang Junfeng, an analyst at China International Futures (Shanghai) Co.
“If it’s true, the news will have a negative impact on the market as it could signal the government’s expectations for further property price falls,” said Fang. Still, “bad news gets ignored these days as the mood in the market is very upbeat.”
“If they pass the stress test, it’s going to set the stage for another huge rally,” Fang said.
Banks were instructed last month to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, a person with knowledge of the matter said, declining to be identified because the regulator’s requirement hasn’t been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent.
To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net
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