OPINION: COVID-19 is slowing China’s economy and sparking crises in its property sector, weighing on iron ore prices just as the big miners see costs rise.
The COVID-19 crisis has slowed China’s economy and sparked an ugly series of crises in its property and banking sectors that is set to squeeze the profits of Australia’s big miners, sending iron ore stocks into a bear market and raising questions for government finances.trading in Shanghai on Friday brought no relief, with the steelmaking commodity down another 4 per cent.
But it’s hard to shake the concern that Australia’s big iron ore miners face a worrying squeeze, where falling demand and rising costs conspire to crimp profitability. The danger here is the mortgage boycotts widen into a more systemic threat to the financial system, a flashpoint of social unrest, or both.
Chinese financial stocks lost 1.4 per cent in trading on Friday, and have fallen for 10 straight days in their longest ever losing streak, as reports that a growing number ofChina Real Estate Information Corporation reported that home buyers had stopped mortgage payments on at least 100 uncompleted projects in more than 50 cities on Wednesday. What was particularly worrying was that the numbers indicated a rapidly growing trend, up from 28 projects on Monday and then 58 projects on Tuesday.
The problem needs to be seen in some context; Chinese banks have put the value of mortgages affected by the payment boycotts at $US312 million, which is obviously pretty minor in the scheme of this giant asset class.And Chinese regulators said on Thursday night they would work with local governments to get these projects completed. Although, like many recent government policies, it remains to be seen whether promises turn into execution.
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