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China stocks fall most in 8 weeks as property, financials weigh

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SHANGHAI — China stocks slumped the most in nearly 8 weeks on Friday, dragged by property developers and financial firms, following homebuyers’ threats to stop mortgage payments on unfinished apartments despite Beijing’s assurance to solve the crisis.

Sentiment remained weak as China’s economic growth slowed sharply in the second quarter, although data showed a surprising rise in retail sales.

The blue-chip CSI300 Index fell 1.7% while the Hang Seng Index declined 2.2% on Friday.

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For the week, the CSI300 Index lost 4.1%, the biggest drop since April 22, while the Hang Seng Index saw its biggest slump since March 2020, down 6.6%.

Growing numbers of homebuyers have threatened to halt mortgage payments until developers resume construction of pre-sold homes. The protest threatens to stall a nascent recovery in China’s capital-starved property sector and hit banks with hefty writedowns, analysts said.

Chinese regulators on Thursday vowed to help local governments deliver property projects on time, while at least 10 banks said mortgages related to risky property projects are relatively small, and risks are controllable.

In mainland markets, real estate developers tumbled 5% and banks lost 2.4%, while mainland developers listed in Hong Kong plunged 5% to a 10-year low.

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Among other sectors, brokers, healthcare , resource, infrastructure, and transport declined more than 2% each.

China’s gross domestic product (GDP) rose 0.4% year-on-year in the second quarter, missing expectations, as widespread lockdowns to curb record COVID cases hit industrial activity and consumer spending.

“The economy likely bottomed in Q2. It is on track for a slow recovery,” said Zhiwei Zhang, Chief Economist at Pinpoint Asset Management.

Data showed retail sales rose 3.1% following the easing of COVID-19 restrictions last month. Analysts had expected flat sales after a 6.7% drop in May.

“The retail sales data is better than expectations,” said Linus Yip, chief strategist at First Shanghai Group, picking the economic recovery to gain momentum.

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Chinese Premier Li Keqiang said the government will support the economy while preventing inflation, state media reported on Thursday, signaling increased concerns over price rises.

“Given the tame growth, China’s government is likely to deploy economic stimulus measures from now on to rev up its flagging growth,” said Toru Nishihama, Chief Economist at Dai-ichi Life Research Institute, adding hurdles are high for its central bank to cut interest rates further.

Big tech companies traded in Hong Kong fell 3.2%, with Alibaba down down nearly 6% after the Wall Street Journal reported the tech giant’s cloud division has been summoned by Shanghai authorities in connection with a theft of police data.

(Reporting by Shanghai Newsroom; Editing by Lincoln Feast and Sherry Jacob-Phillips)

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