Chinese property stocks watched as banks urged to offer funding

SHANGHAI: Chinese developer stocks and bonds rallied after a report that the nation’s financial regulators told the biggest state-owned banks to provide financing worth at least US$85bil (RM395bil) to the battered property sector.

A Bloomberg Intelligence gauge of real estate stocks jumped as much as 2.6% before paring gains.

Cifi Holdings Group Co, KWG Group Holdings Ltd and Agile Group Holdings Ltd were the top gainers in Hong Kong, up more than 7% each.

Meanwhile, higher-rated developer US dollar bonds rebounded, with some notes snapping a two-week losing streak.

The People’s Bank of China and the China Banking and Insurance Regulatory Commission recently told the six largest banks to each offer at least 100 billion yuan (US$14bil or RM65bil) of financing support including mortgages, loans to developers and purchases of their bonds, people familiar with the matter told Bloomberg News.

Mainland markets are closed this week for a holiday.

The move would be the latest in a series of actions intended to arrest a property slump that’s been weighing on the world’s second-largest economy for more than a year.

Chinese policymakers have already encouraged local governments to ease curbs on home-buying and asked lenders to meet reasonable financing needs of developers.

“We believe this adds weight to the long list of ongoing easing measures for the property sector and suggests the worst time of property tightening is likely behind us,” Citigroup analysts, including Judy Zhang, said in a note.

The move is also positive for lenders such as China Merchants Bank Co, helping ease some worry over their credit risk, according to Citi.

The big banks are unlikely to be forced to lend to the most troubled developers, Zhang wrote.

Among other measures, China also unveiled a rare tax incentive for home-buyers last Friday, while the nation’s central bank lowered interest rates on housing provident fund loans for first-home buyers.

Calls for industry support have gathered pace in recent weeks ahead of the twice-a-decade Communist Party congress later this month.

Steven Leung, executive director at UOB Kay Hian Ltd said: “The market is focused on the party congress later this month and policies on the property market will be the most important to judge on whether this crisis is coming to an end.

“The size of the loan is big compared to the level in the first half, which is vital and helps developer cash flow.” — Bloomberg