Chinese developers’ shares rally on expectation of more policy support to boost property sales
Analysts have mixed views on whether such policies will work
Major Chinese developers’ stocks rose more than 7 per cent at one stage on Tuesday on the back of market expectations that more property easing policies will be unveiled after the annual session of the National People’s Congress (NPC) next month to boost property prices and reboot the weak mainland China economy.
The rally came after Premier Li Keqiang said on Monday the government would act decisively if there were signs that economic growth might slip out of a “reasonable range”.
“The remark of Premier Li has led the market to widely expect China will introduce more policies to support the property market, which has led to a strong rally of the mainland developers,” said Louis Tse Ming-kwong, director of VC Brokerage.
Possible measures included the People’s Bank of China relaxing mortgage policies further as well as cutting interest rates and banks’ reserve requirement ratios, which Tse said would help mainland developers sell more flats.
The People’s Bank of China (PBOC) said on Tuesday that Chinese banks extended a record 2.51 trillion yuan (HK$3 trillion) of new yuan loans in January, and M2 money supply grew by 14 per cent, the most in 19 months, which Tse said was good news because extra liquidity would support stock and property transactions.
“The yuan has also become more stable since last week which will also help boost stock and property buying interest,” he said.
Leading the rally on Tuesday were big players including China Resources Land which rose 7.4 per cent before narrowing the gain to close 5.38 per cent higher at HK$18.42, and China Overseas Land and Investment which rose 7.36 per cent before closing 5.29 per cent higher at HK$22.90.
China Vanke rose 6.4 per cent before closing 4.27 per cent higher at HK$16.62. KWG Property was up 5 per cent at one stage before closing 4.53 per cent higher at HK$5.08, while Sunac rose 7.53 per cent before closing 4.73 per cent higher at HK$4.87.
They all outperformed the Hong Kong market’s benchmark Hang Seng Index which closed 1.08 per cent higher at 19,122.08.
The PBOC reduced the minimum down payment to buy houses to 20 per cent, the lowest level since 2008, in most cities two weeks ago in an effort to stimulate a housing market facing strong headwinds from oversupply.
The central government has listed property destocking as one of its top priorities this year and has urged local governments to issue policies to make it easier for homebuyers to enter the market. Mainland media have reported that more than 50 cities have started providing purchase subsidies to homebuyers, and more beneficial policies are expected to be rolled out after next month’s NPC meeting.
Tian Ming, chairman of Hong Kong-listed mainland developer Landsea Green Properties, said he expected the government would cut interest rates further this year to boost the market.
But he said there would still be a lot of downward pressure on prices and transactions because there were too many unsold homes in the market, especially in lower-tier cities.
Some analysts are not optimistic about the chances of new policies turning around weak property sales.
“The wider economy is weak, so the property sector will remain volatile this year,” said Eva Lee, UBS’s head of Hong Kong and China property research.
David Hong, head of research at China Real Estate Information Corp, said it was a “valuation recovery”.
“Government is continuing support the sector while many property stocks dropped to record low in the past few weeks,” he said.
Hong said China Overseas Land and Investment hit a 52-week low on January 21 before bouncing back on Tuesday.
However, he said, the marginal effect of government supportive measures had been declining.
“The sales in third- and fourth- tier cities were very poor during the Lunar New Year holiday last week,” he said.