Hong Kong, Nov. 14 (BNA): Chinese real estate stocks and bonds rose on Monday as the market welcomed a broad package set by Chinese regulators to support financing in the beleaguered real estate sector, with the sub-index up nearly two. The highest level during the month in morning trading.
Analysts hailed the package, which sources say lays out multiple measures to boost liquidity, as a “turning point” with one even describing it as the equivalent of “drenching rain after a prolonged drought.”
The plan comes as the cash-strapped sector suffers from defaults and projects faltering, denting market confidence and weighing on the world’s second-largest economy. Reuters reported that previous efforts by policy makers to help with financing did little to boost the real estate market.
“We see real estate having less impact on GDP growth in 2023,” said Tao Wang, chief China economist at UBS Investment Bank Research.
The Hang Seng mainland properties index jumped 16.2%, as share prices of several Chinese property developers posted double-digit gains. Country Garden surged 52% to a three-month high, and was last up 41% by noon.
Logan Group stock jumped 51%, while KWG Group stock jumped 40%. Agile Group and R&F Properties both rose more than 35%.
Yango Group’s troubled dollar bonds due in 2023 rose 1.787 cents on the dollar to 2.712, according to data from Duration Finance. Powerlong Real Estate’s bond for April 2025 was trading at 9.275 cents, up 3.055 cents from Friday. Their bonds also rose on land.
Announcement Scroll to continue
Two sources told Reuters on Sunday that a notice to financial institutions from the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) identified 16 steps to support the industry, including extending loan repayments.
The People’s Bank of China (PBOC) and CBIRC did not respond to Reuters requests for comment.
Citi said the package marked a significant shift in regulators’ policy attitude toward developers, from “restricting” to “giving support”, and “bailout projects, but not developers” to “rescuing developers and projects”.
It added that the notice “provided by far the most comprehensive set of support measures for the struggling real estate market”.
Jefferies estimated that the package, along with other recent policies, would inject about 1.3 trillion yuan ($183.83 billion) of credit into the real estate sector, largely covering public bonds for private developers and trust products that are set to mature by the end of 2023.
Last week, the National Association of Institutional Investors in Financial Markets said it would expand a program to support sales of 250 billion yuan of debt by private companies, including property developers.
Some investors have remained cautious about the impact of the recent policy, however, regulators have already made several attempts to revive the real estate sector and the macro environment remains weak amid COVID restrictions in the country.
James Wong, Portfolio Manager at GaoTeng Global Asset Management Ltd.
Li Jin, CEO of Beijing BG Capital Management Ltd, which specializes in credit investment, said developers who did not default would benefit the most, but that the help would be “less feasible” for offshore equities as it remains unclear how they can Enhanced external financing.
Citi said the package should help bank stocks and also ease investor concerns about developer credit risks.
Citi added that banks with greater exposure to developers, including Ping And Bank, Industrial Bank and China Merchants Bank, would particularly benefit from the package.
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