TheChek News Flow

Beijing has accelerated measures in an attempt to shore up confidence in the real estate sector

Shares in Chinese property companies jumped on Monday following a series of supportive policy announcements, as regulators stepped up efforts to curb property sector turmoil weighing on the world’s second-largest economy.

The Hong Kong-listed shares in the service unit of Country Garden rose as much as 14 per cent in the morning session, while its listed parent company and Longfor Properties rose as much as 6 per cent and 7 per cent, respectively. The Hang Seng Mainland Properties index was up 5.4 per cent as of noon in Hong Kong.

Policymakers have accelerated tweaks to stabilise the sagging housing market in recent weeks, including launching bailout funds and special loans to help developers complete unfinished homes, which had sparked a countrywide mortgage boycott.

The People’s Bank of China said on Friday that it would lower the interest rate for housing provident fund loans by 0.15 percentage points for first-time homebuyers starting from October, the first cut in such loans since 2015. Loans with a term of more than five years borrowed from the government’s housing provident fund will be lowered to 3.1 per cent, according to a statement from PBoC.

The Ministry of Finance also on Friday unveiled a rare tax incentive for homebuyers, which allows individuals who buy new homes within one year of selling their previous homes to enjoy a refund on income taxes, a move intended to encourage property purchases.

On Thursday, the banking and insurance regulator and the PBoC relaxed a floor on mortgage rates for some first-time buyers. In some cities, banks can scrap the lower limit of home loan rates and offer cheaper loans to support demand based on their own profitability conditions.

“The three measures . . . will remarkably shore up the housing market momentum in the fourth quarter,” said Yan Yuejin, research director of E-house China Research and Development Institute. “They will help lower the replacement cost on houses and offer burden reliefs for homebuyers.”

But investors have lost confidence in the financial health of Chinese developers, who have defaulted on both dollar and renminbi repayment obligations. After defaulting on its debt last year, the world’s most indebted real estate developer Evergrande pledged to restart all stalled projects by the end of September.

While policymakers have increased support for homebuyers, a lack of clarity on future measures for real estate companies has exacerbated uncertainty in the market.

Last week, the Hong Kong shares of CIFI Holdings slumped to a record low after the company’s chair predicted “unprecedented” liquidity stress ahead.

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Stocks in Asia struggled to gain traction and US equity futures fluctuated as negative sentiment persisted in markets amid fear that global central banks will keep hiking rates until inflation is tamed, raising the risk of a recession. 

Equities made small gains in Japan and dropped in Hong Kong and Australia. Trading in Asia was muted by a holiday in Sydney and South Korea on Monday and the week-long closure of Chinese markets for Golden Week.  Oil surged to trade near $82 a barrel on indications the OPEC+ alliance is considering slashing production by more than 1 million barrels a day to revive plunging prices when it meets this week. Commodity currencies gained. Those moves increase the risk of more inflation that may prompt central banks to take further aggressive policy action. The pound fell for the first time in five days and European stock contracts lost more than 2% on Monday amid thin volumes, with political and economic turmoil in the UK and challenges facing Credit Suisse Group weighing on sentiment. Prime Minister Liz Truss put the blame for the controversial decision to remove the highest rate of UK income tax on Chancellor of the Exchequer Kwasi Kwarteng, but the government intends to follow through with the plan despite the market chaos. Confidence among Japan’s large manufacturers unexpectedly worsened for three straight quarters following the yen’s rapid depreciation and deterioration in the global economic outlook, adding another headwind for local equities. The yen weakened past 145 per dollar, nearing the level where Japanese authorities intervened last month to support the currency. Brazil-linked global assets will be in focus on Monday as the country’s presidential election is headed to a run-off vote on Oct. 30. 

Nikkei +0.50% Hang Seng -1.78% CSI -0.58% Shanghai -0.55% Shenzen -1.30%

Eur$ 0.9809 CNH 7.1417 CNY 7.1159 JPY 144.80 GBP 1.1185 CHF 0.9848 RUB 59.8951 TRY 18.5539 WTI$ 81.70+2.77% Gold 1,664.20 +0.22% BTC 19,165 -0.36% ETH 1,289.97 -0.97%

S&P +0.18% Nasdaq -0.12% EuroStoxx -1.02% FTSE -0.91% Dax -1.10% SMI

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