Chinese property stocks are rising due to new stimulus measures, but concerns about sustainability remain.

From South China Morning Post: 2024-05-27 04:31:28

Goldman Sachs noted a significant decline in new home prices, prompting China to implement a new stimulus package, including record low down payment ratios and removal of mortgage rate floors. The central bank will offer $41 billion to support the purchase of unsold homes. Despite concerns, investors are buying Chinese stocks in response to policy easing.

Analysts question if easing measures will sustain the property stock rally. Concerns about funding gaps and implementation remain, especially for distressed developers. Beijing aims to destock completed properties only, with risks transferred to local governments and SOEs already financially stretched. Moody’s warns about rental income covering debt servicing costs for public housing units.

The demand-side measures announced by Beijing should stabilize real estate sales. The shift to outright stimulus from restrictions is significant, noted Lawrence Lu of S&P Global Ratings. However, Chinese equity recovery remains vulnerable, with property stocks impacting corporate earnings growth. Confidence in the housing market and inventory reduction solutions remain key to real estate shares’ future performance.



Read more at South China Morning Post: Opinion | Why Chinese property stocks’ fortunes are finally looking up