China property market outlook is improving: HSBC CEO

HSBC Holdings group chief executive Noel Quinn said on Tuesday (Feb 21) that China’s commercial property sector was on the mend, after the bank booked higher-than-expected charges in the fourth quarter linked to its exposure to developers.

“The sentiment in the fourth quarter was more negative than the sentiment that emerged in January,” he said, adding that there were positive developments on both the demand and supply sides, linked to significant policy measures.

His comments came after Europe’s biggest bank reported a 92 per cent surge in quarterly profit, and pledged more regular dividends and share buybacks.

Still, HSBC said that its expected credit losses nearly trebled to US$1.4 billion in the fourth quarter, impacted by charges related to its US$16.8 billion exposure to China’s commercial real estate sector and companies in Britain. This was higher than market expectations of US$1.05 billion.

China’s property sector, which accounts for a quarter of the economy, was badly hit last year as cash-squeezed developers were unable to finish building their housing projects. This prompted a mortgage boycott by some buyers.

Analysts are expecting rate cuts and other measures announced by China to kick-start a recovery in the sector towards the second half of this year. Meanwhile, data shows that the market is stabilising.

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Quinn said: “On the demand side, the reopening of China post-Covid is going to create increased demand over time for commercial real estate. On the supply side, there were some big policy measures announced in early January to provide additional liquidity to the commercial real estate sector.”

“So, encouraging signs in early January,” he noted. “We think that will be positive for the sector, but we thought it wise to take some additional provisions at the end of December. We have a more positive outlook now.”

Last week, Standard Chartered (StanChart) flagged a challenging outlook for China’s real estate sector and said it expected a “protracted recovery”. It said it had minimal exposure to mortgages on buildings under construction.

StanChart’s statutory credit impairment charges more than doubled to US$227 million in the fourth quarter from a year earlier. The charges included US$130 million for exposure to China real estate. REUTERS