China needs ‘non-traditional’ cure for housing slump as third rate cut fails to inspire property stocks, money managers
- China may need to implement more non-traditional measures, or some kind of intervention to restore faith in the property market, Invesco’s Chao says
- The third cut in five-year loan prime rate failed to inspire stocks as Poly Development and Seazen languished, while broader market gained less than 1 per cent
The third cut in the key lending rate tied to China’s home mortgage loans this year failed to spur buying interest in property stocks, with investors calling for more aggressive policy intervention to arrest a slump in the domestic housing market.
Shares of top developers including Poly Developments, Seazen Holdings and China Vanke were largely subdued in Monday trading. The nation’s 18 commercial banks lowered their five-year loan prime rate by 15 basis points to 4.30 per cent, bringing the cumulative reduction to 35 basis points since the start of 2022.
The muted reaction shows the struggle to repair battered confidence in the industry, after years of crackdown on weak developers resulted in a credit squeeze and a mountain of debt defaults. A trail of unfinished projects have led to public backlash, diluting Beijing’s economic revival efforts.
“Lower mortgage rates have not translated into higher property sales due to the lack of confidence in large developers and the presales model,” said David Chao, a strategist at Invesco in Hong Kong. “Policymakers may need to implement more non-traditional measures, or even some kind of intervention, to restore faith in the property market.”
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Poly Developments slipped 0.7 per cent to 16.70 yuan in Shanghai, while Seazen retreated 1.2 per cent to 21.25 yuan. China Vanke added 0.2 per cent to 17.05 yuan in Shenzhen. The CSI 300 Index, which tracks the biggest stocks on the two bourses, advanced 0.7 per cent.