[SINGAPORE] Concerned about the bad debt problem in China? Maybe it's time to worry about Hong Kong. Whether because of a spillover from the mainland's troubles or falling property prices at home, the city's soured loans have suddenly spiked.

Earlier this week, Bank of East Asia reported that its nonperforming loans in Hong Kong almost doubled between the end of December and June 30. The city's second-biggest lender by assets had already been dealing with an increase in delinquencies in China, where it has the second-largest branch network after HSBC. It's now putting out a similar fire closer to home.

In its interim results, the bank offered the most detailed breakdown of bad debts among the five Hong Kong-domiciled publicly traded lenders. Nonperforming loans in Hong Kong jumped to HK$1.75 billion (S$304.7 million) from HK$886 million at the end of December.

The report showed that residential mortgages and loans to retailers are the ones souring the fastest, though it's unclear how much China has contributed to the deterioration (Hong Kong companies that have borrowed to invest in mainland businesses could be among those coming under stress).

BEA Hong Kong's impaired loan ratio rose to 0.49 per cent from 0.34 per cent at the end of 2015.

The Hong Kong Monetary Authority hasn't noticed any significant increase in residential mortgages turning bad. The three-month delinquency ratio published regularly by the city's de facto central bank remained unchanged at an ultra-low 0.04 per cent between February and June.

Still, the overall doubtful loan ratio for Hong Kong retail banks almost doubled to 0.41 per cent at the end of March from 0.21 per cent at the end of June.

The trajectory of bad loans at BEA matches what investors might expect from a territory where residential property prices have dropped from their 2015 peak and retail sales are under pressure.

That means two things may be ahead, neither of them very pleasant for shareholders: equity raisings, which imply dilution, and lower profits, which points to reduced dividends.

Granted, doubtful debts at Hong Kong banks remain extremely low. The 0.41 per cent is less than a quarter of the mainland's 1.75 per cent nonperforming loan ratio as of the end of June (a figure that is widely regarded as understating the true level of soured debts at China's banks).

Still, it is the pace of deterioration that should set alarm bells ringing. Nonperforming loans have been rising quickly at all the five Hong Kong banks, almost tripling in aggregate since 2011.

Again, all lenders are exposed to China to some extent, so part of the problem could be originating there. But BEA's latest report indicates that the mainland can't be seen as the sole cause anymore. It's time for investors to start worrying about Hong Kong itself.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

BLOOMBERG