Chinese property stocks surge as mainland media fans rate-cut speculation and Swiss fund warns of systemic risk
- A gauge tracking 33 Chinese developers jumped by the most in a week as mainland media fanned rate-cut speculation following a slump in domestic housing market
- Rising debt defaults have turned idiosyncratic risk into systemic one, necessitation actions to stabilise the market, according to Swiss fund manager Lombard Odier
Chinese property developers surged in Hong Kong on speculation banks will cut a key borrowing cost for the first time in 20 months amid a liquidity crunch and sliding home sales.
Sunac China led gainers with a 6.1 per cent surge while KWG Group jumped 5.7 per cent and China Aoyuan Group rallied 3.1 per cent. A gauge tracking 33 Chinese developers advanced by 2.3 per cent, the most in a week, according to Bloomberg data, trimming the decline this year to 34 per cent. The Hang Seng Index rose 0.2 per cent on Thursday, having lost about 14 per cent in 2021.
Speculation has been mounting that China will further loosen policies to shore up growth and ease a credit squeeze. The Central Economic Work Conference concluded last week with decision makers pledging to soften the policy tone on the property market, while the central bank trimmed banks’ reserve requirement ratio on Wednesday.
“In our view, what started as an idiosyncratic risk has now become a systemic one,” Lombard Odier Investment Managers said in a note to clients on December 14. “We expect the authorities to institute new policies that should reduce stress for real estate developers in order for them to obtain funding at reasonable and sustainable yields.”
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Chinese real estate giants Evergrande and Kaisa continue unloading assets to cover debt
Commercial banks will probably lower the loan prime rate, regarded as a benchmark borrowing cost in local markets, for the first time later this month, major mainland securities newspapers reported, citing analysts. The one-year rate was last reduced to 3.85 per cent in April 2020 from 4.05 per cent. The China Foreign Exchange Trade System publishes the rate on every 20th day of the month.