Wrapup 1: China property shares firm on more policy support, easing curbs

Yuzhou group Co

06/01/2023 07:45

By Clare Jim
       HONG KONG, Jan 6 (Reuters) - Shares of Chinese property
developers climbed on Friday, lifted by more state support for
the highly indebted sector struggling with weak sales and
investments as China reopens its economy.
    The central bank said on Thursday that for cities where the
selling prices of new homes fall month-on-month and year-on-year
for three consecutive months, the floor on mortgage rates can be
lowered or abolished for first-time home buyers in phases.
    China is also planning to relax restrictions on borrowing
for property developers by dialing back the "three red lines"
policy, Bloomberg News reported on Friday.    
    The property sector, which accounts for a quarter of China's
economy, was badly hit last year as many developers were unable
to finish building projects that led to mortgage boycotts by
some buyers. Lockdowns and movement control measures to control
the spread of COVID-19 also hurt buyer sentiment. 
    Hong Kong's Hang Seng Mainland Properties Index  .HSMPI 
firmed 2.3% in mid-afternoon trade, after jumping close to 4%
shortly after the market open.
    As of 0709 GMT, Logan Group  3380.HK  gained more than 10%,
while top leader Country Garden  2007.HK  rose 6.6%. That
compared with a flat broader market  .HSI .
    "Positive news of state help have mostly been priced-in in
the short term after many share prices more than doubled in the
past month," said CGS-CIMB analyst Will Chu. "For the sector to
re-rate, the market will need to see a meaningful contract sales
improvement in March."
    China's deeply troubled property sector is set to see home
sales fall for the second straight year in 2023, but the pace of
declines will ease helped by policy support measures and the
lifting of the government's strict anti-COVID policies.
    Property sales are expected to slip by a median of 8% this
year, a Reuters survey of eight economists and analysts showed,
compared with a slump of around 25% in 2022, as economic
activity, household income and consumer confidence are seen
rebounding in the second half.
    The housing authorities vowed on Thursday to give strong
support to first-time home buyers by allowing smaller down
payments and cutting mortgage interest rates.
    Ni Hong, head of China's housing regulator, told state
broadcaster CCTV that "reasonable" support needs to be given to
buyers of second homes although not for the purchase of three
homes or more.
    THREE RED LINES
    To help cash-strapped developers, Beijing may allow some
property firms to add more leverage by easing borrowing caps,
and push back the grace period for meeting debt targets set by
the "three red lines" policy, Bloomberg reported on Friday.
    Markets raised questions about the policy, introduced in
late 2020, after developers who met all three debt ratio
requirements also defaulted, including Kaisa Group  1638.HK  and
Yuzhou Group  1628.HK .  
    Sources have told Reuters banks have been disregarding the
policy since the debt crisis and were reluctant to lend to even
developers who have passed the three red lines due to concerns
about the impact of such exposure on their balance sheets. 
    "A healthy balance sheet doesn't necessarily mean good
liquidity in companies," said CGS-CIMB's Chu. "Regulators want
to send a signal that the policy will not be so strict anymore
because it's not good for the economy and market."  
 (Reporting by Clare Jim and Donny Kwok; Editing by Jacqueline
Wong)
 ((clare.jim@thomsonreuters.com;))