China's property shares surge as investors bet on stimulus hopes (updated)

KWG group

06/06/2023 06:35

(Adds analyst comment, details; paragraphs 6-16)
    By Clare Jim and Liangping Gao
       HONG KONG, June 6 (Reuters) - China property stocks
listed in Hong Kong  .HSMPI  jumped as much as much as 7.9% on
Tuesday, as investors clung to hopes that Beijing would roll out
more supportive measures soon to bolster the embattled sector.
    Once a pillar of economic growth, the sector has softened 
since April after a short-lived rally, as a bleak economic
outlook outweighed the impact of policy measures rolled out late
last year.    
    The state-backed China Economic Times called for an
adjustment to home purchase curbs in first-tier cities, citing
industry opinions that the step would help clear inventory in
non-core districts, while not driving up prices in core areas.
    The newspaper, sponsored by the State Council, or cabinet,
added that market participants expected the government to hasten
more property stimulus in June to aid "reasonable" homebuyer
demand and restore market confidence.    
    By noon, shares of major developer Longfor Group  0960.HK 
surged 9.4%, while defaulted peers Sunac China  1918.HK  and KWG
Grouop  1813.HK  gained 12.8% and 17.1%, respectively, against a
rise of 1.2% in the benchmark Hang Seng Index  .HSI .    
    Mainland-listed property stocks listed posted modest gains,
with the CSI 300 Real Estate Index  .CSI000952  up 1.5%.
    While investors welcome any steps to prop up the sector that
accounts for a quarter of the world's second largest economy,
some analysts were sceptical about the real impact, as homebuyer
and broader consumer confidence remained weak. 
    "The broad-based confidence weakness ... also weighs on
property sales," Citi said in a report. "We believe now a better
economic outlook and stable job expectation are also necessary
conditions for home sales to quickly pick up."
    It expected fiscal policy could be more effective than an
expansionary monetary policy.
    Last year's sharp slump in the sector saw developers default
on debt or bonds and suspend construction of presold housing
projects.
    To bolster demand, local governments have rolled out
hundreds of domestic policies since last year and central
policymakers took extensive steps in the second half to buoy
liquidity and stabilise the property market.
    The boost, enhanced by the lifting of tough COVID-19 curbs
in December, has proved to be short-lived, however.
    Property investment and sales fell in April as consumers
stayed cautious about big-ticket spending, amid concerns over
incomes and jobs as a post-pandemic recovery loses steam.
    Investors' hopes for further national stimulus policies
warmed again last week after supportive measures by several
second-tier cities.     
    Potential steps could include lower down-payment and home
purchase requirements, and refined measures to boost developers'
liquidity, analysts have said.    
    Zhongtai Securities said a continuous rollout of relaxation
measures would help stimulate demand and market confidence, but
could disappoint the market if they fall short of expectations.
    "This may turn out to just be another sticking-plaster for
China’s ailing property sector," said Susannah Streeter, head of
money and markets at Hargreaves Lansdown. 

 (Additional reporting by Jason Xue in Shanghai and Samuel Indyk
in London; Editing by Sherry Jacob-Phillips and Clarence
Fernandez)
 ((clare.jim@thomsonreuters.com;))