Thursday, July 7, 2022

Chinese developers rally as PBOC keeps lending rates steady

Chinese developers

The Hang Seng Properties Index rose 3.7%, trimming year-to-date losses to 6.3%

Hong Kong-listed shares of Chinese developers rose Monday morning after the People’s Bank of China kept benchmark lending rates steady and new sales data suggested an improving outlook for the sector.

China Resources Land Ltd. shares advanced 7.1%, China Overseas Land & Investment Ltd. gained 6.9%, Agile Group Holdings Ltd. added 7.9% and Seazen Group Ltd. jumped 12%. China Vanke Co., Longfor Group Holdings Ltd. and Guangzhou R&F Properties Co. added 4.6%, 5.6% and 8.7%, respectively.

The Hang Seng Properties Index rose 3.7%, trimming year-to-date losses to 6.3%.

The gains came after China’s central bank on Monday kept its five-year loan prime rate, which is the reference rate for mortgages, unchanged at 4.45% as expected. The PBOC had cut the five-year rate in May.

The PBOC keeping the five-year LPR unchanged means home buyers won’t face higher mortgage payments amid rising inflation, which could ‘encourage more buyers in the property market and boost sales for developers,’ said Raymond Cheng, head of Hong Kong and China research at CGS-CIMB Securities.

Meanwhile, rate cuts should be in the cards given the state of China’s economy, ING analyst Iris Pang said in a note. With the weak economic recovery, rate cuts in the coming months are still likely as we expect the economic recovery to be slow under the Covid-zero policy, Pang said.

Investor sentiment is also getting a boost from signs that Chinese property sales have recovered since May, which Nomura analysts Jizhou Dong and Stella Guo attributed mainly to pent-up housing demand. In a note, the Nomura analysts pointed to data from Wind showing that sales momentum for last week picked up particularly in the four tier-one cities of Beijing, Shanghai, Guangzhou and Shenzhen.


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