Chinese property stocks watched as banks urged to offer funding
CHINESE developer stocks and bonds rallied after a report that the nation’s financial regulators told the biggest state-owned banks to provide financing worth at least US$85 billion to the battered property sector.
A Bloomberg Intelligence gauge of real estate stocks jumped as much as 2.5 per cent, led by KWG Group Holdings and Agile Group Holdings, each up more than 9 per cent in Hong Kong. Shares of Country Garden Holdings also gained more than 6 per cent. Meanwhile, higher-rated developer dollar bonds rebounded, with some notes snapping a two-week losing streak. Mainland markets are closed this week for a holiday.
The People’s Bank of China and the China Banking and Insurance Regulatory Commission recently told the six largest banks to each offer at least 100 billion yuan (S$20 billion) of financing support including mortgages, loans to developers and purchases of their bonds, people familiar with the matter told Bloomberg News.
The move would be the latest in a series of actions intended to arrest a property slump that’s been weighing on the world’s second-largest economy for more than a year. Chinese policymakers have already encouraged local governments to ease curbs on homebuying and asked lenders to meet reasonable financing needs of developers.
“We believe this adds weight to the long list of ongoing easing measures for the property sector and suggests the worst time of property tightening is likely behind us,” Citigroup analysts including Judy Zhang wrote in a note.
The move is also positive for lenders such as China Merchants Bank, helping ease some worry over their credit risk, according to Citi. The big banks are unlikely to be forced to lend to the most troubled developers, Zhang wrote.
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Among other measures, China also unveiled a rare tax incentive for homebuyers on Friday, while the nation’s central bank lowered interest rates on housing provident fund loans for first-home buyers. Calls for industry support have gathered pace in recent weeks ahead of the twice-a-decade Communist Party congress later this month.
Here is what other analysts are saying:
Steven Leung, executive director at UOB Kay Hian:
- “The market is focused on the Party Congress later this month and policies on the property market will be the most important to judge on whether this crisis is coming to an end.”
- The size of the loan is big compared to the level in the first half, which is vital and helps developer’s cash flow.
Create Lee, investment manager at Monmonkey Group Asset Management:
- The news may ease investor worry because of further policy relaxation expectations and can boost sentiment in the short term. However, longer term prospects still depend on buyer confidence. BLOOMBERG
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