Chinese Property Stocks Surge as Barrage of Stimulus Continues
Two major Chinese cities lifted key curbs on buying homes to boost demand
Chinese property stocks powered higher in mainland and Hong Kong stock markets, thanks to a barrage of measures from Beijing to stabilize the country’s struggling property market.
The rally followed the central bank’s announcement on Sunday directing commercial banks to lower mortgage rates for existing home loans by at least 30 basis points below the Loan Prime Rate before Oct. 31.
Also, two major Chinese cities over the weekend lifted key curbs on buying homes to boost demand. The new regulations make it easier for people outside Shanghai and Shenzhen to buy property in the cities, reversing measures that limited property purchases to residents.
“We think Hang Seng Mainland Properties index has seen the biggest rally over the past decade, but this is mainly policy and sentiment induced,” Morningstar analyst Jeff Zhang said. “With no material improvement in home sales and prices yet, we feel the current gain may not be sustainable as most stocks we cover see limited upside now.”
The move by Shanghai and Shenzhen might help slow the on-year falls in home transactions over the next few months, Zhang said.
The Hang Seng Mainland Properties Index, which tracks Chinese real-estate developers listed in Hong Kong, was 8.4% higher at Monday’s midday break, taking this month’s gain to 39%.
Poly Developments & Holdings rose 7.0% in Shanghai. In Hong Kong, Longfor Group was 19% higher and Sino-Ocean Group surged 9.3%.
The weekend’s moves followed Thursday’s China Politburo meeting, when it vowed to prevent the property sector from declining further.
“[The Politburo meeting] marks the first time the country’s top decision-making body acknowledged the notable difficulties of the property sector, which signals its strong commitment to stabilizing the sector, in our view,” said Nomura analysts Jizhou Dong and Riley Jin in a research note.
Chinese stocks have been boosted by a string of measures to support the flagging economy last week. The Hang Seng Index was 3.4% higher and the Shanghai Composite Index gained 5.7% Monday morning.