Chinese property stocks extended a rally on Thursday as markets pledged to shore up the battered real estate sector amid mounting pressure by Beijing’s top economic leaders at home and abroad.
China’s economic Tsar Vice Premier Liu He said on Wednesday that the government needed to reduce risks in the industry and proposed measures to facilitate a new growth model for the sector.
At a meeting of the Financial Stability and Development Committee, a regulatory body under the State Council, Liu urged the roll-out of market-friendly policies to support the economy.
Liu’s pledge received widespread support from the central bank and other top institutions, including securities and currency regulators.
This led the Hang Seng Mainland Properties index up 14.8% as of Thursday afternoon, while the main Hang Seng index gained 5.8%. The sub-index had already jumped 14.7% on Wednesday.
“The stocks that have been jumping a lot, have fallen a lot before, and they are still at low levels,” said Thomas Kwok, head of equity business at CHIEF Securities. “Is the rally sustainable? This is a concern, as we cannot see clear policies that will fundamentally change the liquidity problem for developers.”
Sunak China, the country’s No. 3 property developer by sales, jumped 47.5% to a one-week high, after losing nearly 40% this month on debt repayment concerns.
Top developer Country Garden and embattled China Evergrande Group both gained 22%.
The real estate sector, a key driver of growth, has been struggling for months as Beijing’s campaign to ease high debt levels triggered a liquidity crisis among some major developers, resulting in bond defaults and freezing .
Following Liu’s remarks, the banking and insurance regulator also said on Wednesday that it would encourage merger and acquisition loans for developers to stabilize land and home prices, transform the real estate sector and buy distressed assets.
The finance ministry later said China was conducting a planned property tax test on the ice this year, the state-run Xinhua news agency reported.
Trading in property stocks has been very volatile in recent months. They were firm earlier this year on hopes that the sector was easing further, but declined this month on continued concerns over liquidity risks at companies.
However, Citi cautioned that broad-based easing is nearly impossible with flooding liquidity for assets, and saw no significant policy changes since Wednesday, despite an encouraging tone.
“The recent minor improvements… are not a game-changer,” the investment bank said in a report. “The best hope for now is targeted downside protection for some of the (company) names through coordination with local government and financial institutions.”
https://biz.crast.net/investors-cheer-for-chinas-pledge-to-support-damaged-property-sector/
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