Stock Market

Chinese property stocks skyrocket as PBOC pumps up support

Get ready for some good news, folks! The shares of major Chinese property developers took flight on Tuesday when the People’s Bank announced that it’s extending its financial support for the sector until the end of 2024. This move comes in response to the lackluster impact of the current stimulus measures on the struggling property market.

Let’s rewind a bit. Last November, the People’s Bank of China (PBOC) introduced a whopping 16 measures to prop up local property developers who were caught in a liquidity crisis that had been plaguing them for nearly three long years. These measures were designed to make it easier for developers to access financing options and loans, with the added goal of enticing private investors back into the sector. And guess what? These measures will now be extended until the end of 2024 instead of their initial expiry date of end-2023, as declared by the PBOC on Monday.

It’s a clear sign that the property sector is in for some serious TLC, as Beijing scrambles to bolster economic growth following three grueling years of COVID restrictions. You see, real estate is like a big, powerful engine driving China’s economy, accounting for roughly a quarter of its overall gross domestic product.

Naturally, the news of extended support sent shockwaves of excitement through the market. Shares of major property developers like China Vanke Co Ltd (HK:2202) and Country Garden Holdings (HK:2007) hopped up by 1.2% and 2%, respectively, in Hong Kong trade, giving the Hang Seng index a jolt of 1.4%.

But that’s not all! The Hang Seng Properties Index jumped 1.1%, while Tianjin Jinbin Development (SZ:000897) and Beijing Zodi Investment (SZ:000609), listed on the Shenzhen stock exchange, shot up by 2.8% and 1.7%, respectively. It’s like watching fireworks light up the night sky!

However, despite all the stimulus measures thrown at it, the Chinese economy is still struggling to regain its footing after enduring the blows of the COVID era. The past three months have seen weak economic readings that only reinforce this sobering reality.

The biggest property developers in China have been wrestling with challenges like raising funds, completing projects, and selling properties for the past three grueling years. Even in 2023, after the anti-COVID measures were lifted, they’ve found little relief. To make matters worse, frustrated consumers have initiated a mortgage boycott due to unfinished projects. It’s like a bad case of déjà vu.

And here’s another twist: Private investment in China has hit a major speed bump. Private investors are understandably hesitant to dive in headfirst due to the cloud of uncertainty hanging over future policies. It’s as if they’re waiting for the storm to pass before they set sail.

Now, investors are turning to Beijing and urging them to take further action to prop up the property sector. All eyes are on a high-level government meeting later this month, where hopes are high for more stimulus measures. It’s like the calm before the storm, folks—get ready for some fireworks!

So, buckle up and stay tuned. The Chinese property market is in for a wild ride, and we’re about to witness some serious moves that will have us all on the edge of our seats. Let’s hope the tide turns and brighter days lie ahead for this crucial sector of the Chinese economy.

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