China property developers to see marginal ease in liquidity pressure: UOBKH

WITH supply policy seeing an inflexion point, coupled with a relaxing demand policy, UOB Kay Hian (UOBKH) expects to see a marginal ease in the liquidity pressure of China developers, it said in a report.

The research team also expects the sentiment of both homebuyers and investors to improve, but remains “relatively cautious” on the scale and speed of deployment of top-level rescue funds.

UOBKH’s views come amid media reports stating that China’s Ministry of Housing and Urban-Rural Development, the Ministry of Finance and People’s Bank of China (PBOC) will jointly support policy banks to grant special loans to projects with delivery issues due to funding issues. This indicates an inflexion point on supply-side policy.

“This is the first time that the central government has indicated direct financial support since the outbreak of ‘mortgage-no-pay crisis’, and we think this marks the inflexion point of supply-side policy, i.e. from being hawkish to modestly supportive,” said UOBKH analysts Liu Jieqi and Ariel Poh.

Sales momentum, however, remained weak in August 2022, according to CREIS sales data, which noted that new-home sales volume rose 9 per cent week on week but dropped 25 per cent year on year. The data covers 22 major cities for the 34th week of 2022.

PBOC’s cutting of its 5-year loan prime rate by 15 basis points to 4.3 per cent, among other factors like the relaxation of home-purchase restrictions in higher-tier cities, also indicates more room for mortgage rate cuts by banks.

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“Supported by continuous policy easing on the demand side, we expect to see property sales in core cities recover in the next 2-3 months,” UOBKH’s analysts said.

They expect privately-owned developers to issue China Bond Insurance Co-guaranteed bonds soon, with “bold” support from PBOC.

They maintained their “buy” calls on China Resources Land and China Overseas Land & Investment with unchanged target prices of HK$43.60 and HK$29.50 respectively. It lowered its target price on CIFI Holdings to HK$3.62, but maintained its “buy” call on the Hong Kong-listed counter.