China Property Stocks Fall on Disappointing Home Sales Data

By Tracy Qu

Chinese property stocks fell after the latest home sales data pointed to continued weakness in the country's real estate sector.

The Hang Seng Mainland Properties Index fell as much as 1.95%, dragging down Hong Kong's main Hang Seng Index. At midday, developers' shares were lower with Longfor down 2.3% while China Vanke and Sunac China dropped 3.4% and 4.8%, respectively. The benchmark Hang Seng Index was 0.2% higher.

Weakness in the sector followed news that new home prices in 70 major Chinese cities dropped more rapidly in May than in the previous month, according to data from China's National Bureau of Statistics released Monday.

The data also showed that investment in the housing sector in the January-May period decreased 10.1% compared with the same period a year earlier, widening from the 9.8% decline in the first four months of the year.

"Analysts are in general anticipating weaknesses in home prices and expect more adjustments downward to during the process of clearing the inventory overhang," Redmond Wong, chief China strategist at Saxo Markets said.

Authorities have taken several measures to revive the real estate sector, such as providing citizens with cheaper home loans and relaxing home-buying restrictions but they have yet to yield the desired results, and analysts say Beijing could be considering more aggressive measures.

A slowing economy and weak consumer sentiment have dragged down sales for many property developers in recent years, pushing them into a liquidity crisis. Unable to tap debt markets, many developers have defaulted on loans and bond payments, with some going bankrupt.

"We continue to expect more housing easing measures in coming months, including more relaxation of home purchase restrictions in top-tier cities and a further reduction in mortgage interest rates, among others," Goldman Sachs analysts led by Yuting Yang and Hui Shan said in a note.

However, they anticipate that these measures could only result in an L-shaped recovery for the sector.

Some expect these measures to be announced in a key meeting of Chinese leaders in July.

"For July's meeting, we expect similar rhetoric to previous ones but more detailed measures may be released, such as incremental funding support to safeguard project delivery and absorb excess inventory," Morningstar analyst Jeff Zhang said.

Write to Tracy Qu at tracy.qu@wsj.com

(END) Dow Jones Newswires

June 17, 2024 01:26 ET (05:26 GMT)

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