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CHINA: Property Stocks Plunge Following Housing Briefing

CHINA
EM BulletAPACChinaEmerging Market NewsBulletGlobalFixed Income BulletsForeign Exchange BulletsRegionMarkets
  • China is expanding its "white list" credit program for property projects to 4tr yuan by the end of 2024, up from 2.23t yuan currently. This program is designed to provide credit support for developers, helping them complete unfinished housing projects, particularly those that have caused unrest due to delays. Minister Ni also highlighted plans to renovate 1 million homes in "urban villages," using local government special bonds for funding. Additionally, banks are being urged to expedite loans for stalled projects, aiming to deliver homes to buyers.
  • Local governments are also empowered to buy back idle land parcels where developers are unwilling or unable to proceed with construction. Measures to stabilize the housing market in key cities such as Beijing, Shanghai, Guangzhou, and Shenzhen were also emphasized, with steps like easing home purchase restrictions and lowering mortgage rates.
  • Investors saying the update doesn't seem to fix the underlying problem that there seems to currently be an over supply of property and/or home buyers don't have the ability/want to purchase properties at the moment, the recently announced measures look to be just transferring the risk from some developers onto local governments.

Market Reaction:

  • Despite these support measures, market sentiment remains weak. The CSI 300  which initially showed gains of up to 1.3%, erased those gains during the briefing and now trades flat. Property stocks, particularly those focused on developers, saw significant declines. A Bloomberg gauge tracking developer shares dropped around 7.5% with major onshore developers like Sunac (-20%), Vanke (-10%), Longfor (-9%), the moves reflecting investor skepticism about the effectiveness of the government's efforts.
  • The offshore yuan also pared some morning gains as officials spoke, signaling cautious market reactions, while in the commodity space Iron ore and steel futures in both Singapore and Shanghai also weakened.
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  • China is expanding its "white list" credit program for property projects to 4tr yuan by the end of 2024, up from 2.23t yuan currently. This program is designed to provide credit support for developers, helping them complete unfinished housing projects, particularly those that have caused unrest due to delays. Minister Ni also highlighted plans to renovate 1 million homes in "urban villages," using local government special bonds for funding. Additionally, banks are being urged to expedite loans for stalled projects, aiming to deliver homes to buyers.
  • Local governments are also empowered to buy back idle land parcels where developers are unwilling or unable to proceed with construction. Measures to stabilize the housing market in key cities such as Beijing, Shanghai, Guangzhou, and Shenzhen were also emphasized, with steps like easing home purchase restrictions and lowering mortgage rates.
  • Investors saying the update doesn't seem to fix the underlying problem that there seems to currently be an over supply of property and/or home buyers don't have the ability/want to purchase properties at the moment, the recently announced measures look to be just transferring the risk from some developers onto local governments.

Market Reaction:

  • Despite these support measures, market sentiment remains weak. The CSI 300  which initially showed gains of up to 1.3%, erased those gains during the briefing and now trades flat. Property stocks, particularly those focused on developers, saw significant declines. A Bloomberg gauge tracking developer shares dropped around 7.5% with major onshore developers like Sunac (-20%), Vanke (-10%), Longfor (-9%), the moves reflecting investor skepticism about the effectiveness of the government's efforts.
  • The offshore yuan also pared some morning gains as officials spoke, signaling cautious market reactions, while in the commodity space Iron ore and steel futures in both Singapore and Shanghai also weakened.