Chinese Property, Bank Stocks Gain After New Stimulus Measures

By Jiahui Huang

Chinese property and bank stocks rose after the People's Bank of China unveiled a slew of measures to support the country's slowing economy.

The Hang Seng Mainland Properties Index, which tracks Chinese developers listed in Hong Kong, rose 4.1% on Tuesday morning, outperforming the benchmark Hang Seng Index's 3.1% gain. The Hang Seng Mainland Bank Index advanced 4.2%.

Among top gainers, KE Holdings jumped 13% in Hong Kong trading and Guangzhou R&F Properties added 11%. Sunac China and Shimao Group were 6.8% and 5.7% higher, respectively. Bank of Communications rose 5.8% and China Merchants Bank gained 8.9%. Chinese developers and banks also notched gains in Shanghai and Shenzhen.

At a joint press conference Tuesday, People's Bank of China Gov. Pan Gongsheng announced a cut to banks' reserve requirement ratio by 50 basis points and lowered the seven-day reverse repo rate by 20 basis points.

Meanwhile, China plans to lower the minimum down-payment ratio for second homes to 15%, the same level as for first home purchases. The central bank will also expand funding for banks to extend loans via a destocking scheme for unsold homes.

Further, China will cut rates on existing mortgages by around 50 basis points on average, bringing them closer with rates on new mortgages, Pan said.

The new stimulus measures followed a run of downbeat monthly data, raising concerns over whether China can reach its goal of around 5% growth this year. Some brokerages and banks lowered their gross domestic product forecasts for China last week.

A rescue package unveiled in May to address the property sector's malaise hasn't done enough to offset subdued consumption sentiment and weak confidence in the economy, which has continued to weigh on demand for homes in China.

"This is the most significant PBOC stimulus package since the early days of the pandemic," Julian Evans-Pritchard, Capital Economics' head of China economics, wrote in a note. However, he cautioned that the measures on their own may not be sufficient.

Given household deleveraging and softer corporate demand for borrowing, analysts believe more fiscal stimulus is needed to boost China's economy. The impact of monetary policy on the economy may not be as effective as authorities hope, they say.

Further measures to boost property demand are likely needed despite the bundle of measures announced Tuesday.

The new property stimulus measures won't have a huge impact on new home sales as they focus more on existing mortgage loans, Daiwa analyst William Wu said. He added that the new measures could slow down the lowering of rates on new mortgages given that the PBOC kept the five-year loan prime rate steady last week.

"The lowering of second home down-payment ratio is positive for high-end properties' demand," as second homes are typically related to upgrades by homebuyers, Morningstar analyst Jeff Zhang said.

The stimulus package is positive for the property sector over the near term, but much will depend on policy implementation to determine whether there is a sustainable impact on the sector, said CGS International Securities analyst Raymond Cheng.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

September 24, 2024 00:10 ET (04:10 GMT)

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