PanaTimes

Friday, Feb 03, 2023

China property shares soar on Beijing stimulus, despite continued debt crisis

China property shares soar on Beijing stimulus, despite continued debt crisis

Plans to shore up real estate and tech sectors welcomed by investors, but downgrade of third-biggest developer Sunac shows problems persist
Chinese property shares have soared for a second day thanks to a decision by Beijing’s leadership to throw the country’s struggling real estate sector a lifeline amid growing pressures at home and abroad.

Despite a downgrade for China’s third-biggest property developer Sunac on Thursday, stocks in the sector lifted again in Hong Kong and the mainland thanks to an announcement by vice premier Liu He, China’s economic tsar, on Wednesday that the government needed to reduce risks in the industry.

In a sign of the heightened concern inside China’s Communist party leadership about the property sector and the economy in general – best illustrated by the near-collapse of the giant developer Evergrande – Liu urged the roll-out of market-friendly policies to support the economy.

That pushed up the Hang Seng mainland properties index 14.8% by midday in Hong Kong on Thursday, versus a 5.8% gain in the main Hang Seng index. The sub-index had already jumped 14.7% on Wednesday.

Technology shares have also bounced back after being under pressure for months. The Hang Seng tech tracker rose more than 7% after a stunning 22% gain on Wednesday, though has still halved in value from its peaks last year.

However, some investors are concerned that the property rally is not sustainable because it comes against a backdrop of continued problems for China’s biggest developers.

Sunac China, the nation’s third-biggest property developer by sales, was downgraded to B- credit rating by the agency S&P on Thursday – making it harder to borrow money – because of concerns that it might not be able to meet its huge debt repayments of nearly $4bn due this year.

Analysts at S&P have revised Sunac China’s liquidity position downwards from “less than adequate” to “weak”, and warned that the ratings will be reviewed as soon as “we have greater visibility on Sunac’s refinancing plans”.

They wrote: “Sunac China Holdings Ltd is facing concentrated debt repayment over the next six to 12 months, resulting in considerable refinancing risk and weak liquidity. Capital market confidence is weakening rapidly.”

Despite this gloomy assessment, Sunac’s shares were up 60% in Hong Kong on Thursday afternoon. Other major developer Country Garden and Evergrande were both more than 20% to the good.

The real estate sector, a key driver of growth, has struggled for months as Beijing’s campaign to reduce high debt levels triggered a liquidity crisis among some major developers, resulting in bond defaults and shelved projects.

After Liu’s comment, the banking and insurance regulator also said on Wednesday it would seek to stabilise land and home prices, transform the real estate sector and encourage mergers and acquisition loans for developers to purchase distressed assets.
The finance ministry later said China was putting a planned property tax trial this year on ice, state-run Xinhua news agency reported.

Bill Bishop, the China observer and author of the Sinocism newsletter, said on Thursday that the move by Liu to try to shore up the markets showed how concerned Beijing had become.

“The readout shows how worried policymakers have become about the markets, real estate and the economy but I would be cautious in assuming that the messaging from Liu He and other financial regulators means the tough days are over,” he wrote.

“They are certainly trying to send a signal that they don’t want markets to go down more, but is it not clear this a real shift or more of a calibration to stabilize things.”
Newsletter

Related Articles

PanaTimes
Close
0:00
0:00
EU found a way to use frozen Russian funds
First generation unopened iPhone set to fetch more than $50,000 at auction.
WARNING GRAPHIC CONTENT - US Memphis Police murdering innocent Tyre Nichols
House Speaker Kevin McCarthy said he will block Reps. Adam Schiff and Eric Swalwell from serving on the House Intelligence Committee
Almost 30% of professionals say they've tried ChatGPT at work
Interpol seeks woman who ran elaborate exam cheating scam in Singapore
What is ChatGPT?
Bill Gates is ‘very optimistic’ about the future: ‘Better to be born 20 years from now...than any time in the past’
Tesla reported record profits and record revenues for 2022
Germany confirms it will provide Ukraine with Leopard 2 tanks
Prince Andrew and Virginia Giuffre Photo Is Fake: Ghislaine Maxwell
Opinion | Israel’s Supreme Court Claims a Veto on Democracy
Moonwalker Buzz Aldrin Gets Married On His 93rd Birthday
Who’s Threatening Israeli Democracy?
Federal Reserve Probes Goldman’s Consumer Business
China's first population drop in six decades
Microsoft is finalising plans to become the latest technology giant to reduce its workforce during a global economic slowdown
Tesla slashes prices globally by as much as 20 percent
1.4 Million Copies Of Prince Harry's Memoir 'Spare' Sold On 1st Day In UK
After Failing To Pay Office Rent, Twitter May Sell User Names
Lisa Marie Presley, singer and daughter of Elvis, dies aged 54
FIFA president questioned by prosecutors
Britain's Sunak breaks silence and admits using private healthcare
Hype and backlash as Harry's memoir goes on sale. Unnamed royal source says prince 'kidnapped by cult of psychotherapy and Meghan'
Saudi Arabia set to overtake India as fastest-growing major economy this year 
Google and Facebook’s dominance in digital ads challenged by rapid ascent of Amazon and TikTok
FTX fraud investigators are digging deeper into Sam Bankman-Fried's inner circle – and reportedly have ex-engineer Nishad Singh in their sights
TikTok CEO Plans to Meet European Union Regulators
France has banned the online sale of paracetamol until February, citing ongoing supply issues
Japan reportedly to give families 1 million yen per child to move out of Tokyo
Will Canada ever become a real democracy?
Hong Kong property brokerages slash payrolls in choppy market
U.S. Moves to Seize Robinhood Shares, Silvergate Accounts Tied to FTX
Effect of EU sanctions on Moscow is ‘less than zero’ – Belgian MEP
Coinbase to Pay $100 Million in Settlement With New York Regulator
FTX assets worth $3.5bn held by Bahamas securities regulator
A Republican congressman-elect is under investigation in New York after he admitted he lied about his education and work experience.
Brazilian football legend Pele, arguably the greatest player ever, has died at the age of 82.
Hong Kong to scrap almost all its Covid rules
EU calls screening of travellers from China unjustified
US imposes Covid testing for visitors from China
Ukraine President Volodymyr Zelenskyy Addresses Joint Session of Congress - FULL SPEECH
Where is Rishi? Chancellor Jeremy Hunt's excuses about the UK's economic challenges just don't make sense
Former FTX CEO Bankman-Fried finally arrested in Bahamas after U.S. files charges
Corruption works: House Financial Services Chair Waters doesn't plan to subpoena her donor, Sam Bankman-Fried, to testify at hearing on FTX collapse
Ronaldo's new contract...
Prince William's godmother resigns honorary royal role after exposing her/their racism
Tax fraud verdict again exposes illusion of Trump the master businessman
Tax fraud verdict again exposes illusion of Trump the master businessman.
Yellen hints at ‘national security’ probe into Twitter purchase
×