[I-bank focus]Further tightening measures' impact seen mild

    Deutsche Bank believes the impact of the 8th round of mortgage tightening since Oct-09 on the Hong Kong property market will be relatively mild, given there is no corresponding tightening on developers' offering of high loan-to-value (LTV) mortgages, and expects buying demand to skew even more towards the primary market.
  Similar to previous prudential measures, Deutsche Bank thinks the most direct impact in the near term will be weaker mortgage loan growth and higher loan pricing, before mortgage competition potentially kicks back in again. Regardless of other side effects resulting from these prudential measures, such as further pushing purchasing power and risks towards primary projects, the research house believes these rules were successful in limiting over-leveraging in the mortgage segment, with average system LTV of 51% for new loans in FY17 (2005-10 average: 62%), and near zero delinquencies with no cases of negative equity now. As these measures are targeted towards new mortgage growth, the impact should be manageable. Deutsche Bank estimates the capital impact to be limited, at a low-to-high single-digit bp impact on banks under coverage.