China property stocks rally on hopes of potential easing of refinancing
The National Association of Financial Market Institutional has reportedly hosted a meeting with some developers in Beijing on Nov 9 to discuss financing issue
Singapore
CHINESE developers' stocks rallied on Wednesday (Nov 10) on hopes that Beijing could loosen the refinancing for developers to prevent further deterioration of the real estate and related sectors.
According to Chinese media, the National Association of Financial Market Institutional Investors - a financial association responsible for debt financing of corporates in China - hosted a meeting with some developers in Beijing on Tuesday (Nov 9) to discuss the financing issue.
"The financing environment of real estate companies is gradually 'thawing', but it will take time for real estate companies to feel the recovery of financing," the Securities Times said.
Analysts took the meeting to signal that certain policies for real estate companies' domestic debt issuance could be loosened, and high-quality property firms will soon be able to issue debt financing in the open market, allowing banks and other institutions to participate.
"To avoid (a) potential hard landing of (the) property market, it seems that regulators look likely to step up further to help developers get refinancing, to resolve their short-term liquidity issue," said one China analyst in Hong Kong. If so, developers like Aoyuan, Agile, Sunac, Shimao and R&F Properties, whose share prices had been hardest hit because of liquidity concern, should benefit, the analyst added.
On Wednesday, shares of Poly Developments climbed more than 8 per cent in mainland trading, while China Merchants Shekou rose 5.5 per cent. In Hong Kong, China Aoyuan Group and Shimao Group both soared as much as 18 per cent.
Chinese property developers have grown rapidly following years of excessive borrowing. Troubles in the sector came to the forefront in the last few months as Evergrande and other developers missed bond repayments and face the threat of defaulting.
Authorities in China have ramped up efforts to rein in excesses in the property sector and curb speculation among homebuyers. Measures include limiting rampant borrowing among developers and tightening rules for mortgage lending.
Yan Yuejin, research director of the Think Tank Center of E-House Research Institute, expects there will be new policies in the fourth quarter of this year and the first half of next year, to "create a better business environment for real estate companies".
The Chinese media said the financing environment for real estate companies is gradually picking up, and land prices and starting bid prices have also been tempered.
Louis Kuijs, head of Asia economics at Oxford Economics, expects China's property downturn would be significant but contained, due to a low stock of unsold housing, room for policy easing, continuing urbanisation, and significant income growth.
"But, with shifting demographics, high numbers of empty apartments, and some big property developers being heavily over-leveraged, China's huge property sector could crash more heavily," he said.
The economist said if China's property downturn were to follow the pattern of the 2014-2015 property slump, real estate investment growth would trough at -8.8 per cent in Q4 2022.
China's gross domestic product (GDP) growth would drop to 3 per cent on year in Q4 2022, compared to 5.3 per cent in his baseline, and global GDP growth would be 0.7 percentage points lower.
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