MNI China Press Digest Apr 30: Liquidity, Real Estate, Stocks

Highlights from Chinese press reports on Tuesday:

• Inter-bank liquidity is generally sufficient and the funding situation will remain stable across the month, Securities Daily reported citing Wang Qing, chief macro analyst from Golden Credit Rating. The People’s Bank of China has kept the amount of open market operations relatively low due to limited demand for cash withdrawals during the May Day holiday, said Wang. The average value of DR007 since April is 1.85%, which is close to the current short-term policy rate of 1.8%, indicating no obvious liquidity demand pressure, the newspaper said citing analysts. The average DR007 will continue to run above 1.8% in May, as fiscal spending moderates due to season factors while the issuance of local government bonds will likely accelerate, said Wang.
• The central government should establish a fund to guarantee the delivery of housing projects, given the lack of funds in local governments and developers as well as relatively low motivation of banks to provide funds, Yicai reported citing Lu Ting, chief economist of Nomura China. Authorities should guarantee delivery of projects with high sales rates to homebuyers, and local governments should acquire the remaining unsold units and use them as affordable housing with funding support from the central government, said Lu. The downward spiral of the entire Chinese real-estate market persists, and more proactive policies will be introduced in the coming year, Lu added.
• Real-estate stocks rose on Monday with more than 20 companies including Vanke hitting their daily limit on the A-share market, driven by rumors about “directional changes in housing policy”, Yicai.com reported. Some believe authorities will shift focus to destocking from promoting “three major projects” and allow local-government financing vehicles to acquire and convert existing housing into rental housing, relax purchase and prices restrictions and reduce deed taxes to 1%. Recently, in addition to the full relaxation of purchase limit by upper tier-two cities Chengdu, first-tier city Shenzhen is also rumored to ease homebuying restrictions in suburban areas, the newspaper said.