Double boost for property stocks as China pledges support for homebuyers amid industry slump and Evergrande pays up

Asia's Tech News Daily

stocks, has risen almost 12 per cent i

Chinese property stocks jumped in one of their best weeks this year after the banking industry regulator pledged to support first-time homebuyers with easier mortgage financing. Concerns about debt defaults at China Evergrande eased.

Seazen Group and Sunac China surged at least 8 per cent in Hong Kong on Friday trading. China Vanke, the nation’s biggest listed developer, added 2.8 per cent in the city while its Shenzhen-listed shares gained 2.9 per cent. Tianjin Jinbin Development was the best performer on mainland bourses, jumping by the 10 per cent daily limit in Shenzhen.

The Hang Seng Properties Index has risen almost 12 per cent in four straight weeks, the best back-to-back winning since a 13 per cent rally over six weeks in mid-February 2019, according to Bloomberg data. In China, the Shanghai Property Index has gained 4.7 per cent in two days, the most in seven weeks.

“With policy environment tending to be more neutral in the next six to 12-month horizon and the sector is trading at historical trough valuation [of 2.7 times projected earnings], we are turning less bearish on developers,” said Stephen Cheung, an analyst at Jefferies.

Sentiment improved after comments on Thursday by Liu Zhongrui, head of statistics and risk monitoring at the China Banking and Insurance Regulatory Commission, that it will protect real demand for housing in a sign that authorities are monitoring cracks in the industry.

First-time homebuyers will be given breaks on down payments and mortgage rates, Liu said, a day after vice-premier Liu He said at a financial forum in Beijing that the risk in property market was controllable despite the Evergrande debt woes and “reasonable” demand for capital will be met.

Stocks also gained another booster from a report by the Securities Times, a publication under the People’s Daily, that embattled China Evergrande has remitted US$83.5 million to pay offshore bondholders before a Saturday deadline to avert a default.

Until the recent rebound, Chinese property stocks had borne the brunt of the market sell-off this year as the China Evergrande crisis flared, adding to the ill-effects of measures by Chinese authorities to stamp home price speculation and the “three red lines” policy to curb excessive leverage in the industry.

Property stocks in Hong Kong still trade at about 60 per cent discount to their book values, according to Bloomberg data. A gauge of mainland-traded property stocks has lost 7.2 per cent this year, while the Shanghai Composite Index advanced 3.2 per cent.

 

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