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China’s ‘most comprehensive’ bailout for real estate sector lifts stocks and bonds

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HONG KONG, Nov 14 (Reuters) – Chinese real estate stocks and bonds soared on Monday as the market applauded Beijing’s “most comprehensive” support measures aimed at boosting liquidity in the sector in its latest attempt to stabilize the economy. a key pillar for the world’s second largest economy.

The package, which sources say provides multiple funding measures for the cash-strapped industry, has been hailed by analysts as a “turning point”, with one even describing it as the equivalent of “soggy rain after a long drought”.

China’s property sector, which accounts for a quarter of the economy, has struggled with defaults and stalled projects, undermining market confidence and weighing on growth.

Earlier efforts by policymakers to help ease the liquidity crunch did little to bolster the real estate market.

The plan comes nearly a month after Chinese President Xi Jinping secured his third term as leader of the ruling Communist Party at a time when the economy is facing a series of headwinds, including China’s zero COVID strategy. , a housing crisis and the risk of a global recession.

“We think real estate will be a much smaller drag on GDP (gross domestic product) growth in 2023,” said Tao Wang, chief China economist at UBS Investment Bank Research.

The Hang Seng Mainland Property Index (.HSMPI) jumped more than 13.5% to close at a two-month high, with the stock prices of many Chinese property developers posting double-digit gains.

country garden (2007.HK) rose 45.5% to a high of more than three months. Logan Group (3380.HK)KWG Group (1813.HK)Agile group (3383.HK) and R&F properties (2777.HK) all increased by more than 30%.

A Yango Group dollar bond in default due 2023 rose 1.787 cents on the dollar to 2.712 at the start of trading, according to data from Duration Finance. Powerlong Real Estate’s April 2025 bond traded at 9.275 cents, up 3.055 cents from Friday. Their ties also increased on land.

Two sources told Reuters on Sunday that a notice to financial institutions from the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) outlined 16 measures to support the real estate sector, including loan repayment extensions.

The PBOC and CBIRC did not respond to Reuters requests for comment.

Meanwhile, the CBIRC issued a notice on Friday allowing commercial banks to issue letters of guarantee to property companies for blocked pre-sale housing funds.

REAL ESTATE MARKET IN ILLNESS

Citi said the package signals a major shift in regulators’ policy stance toward developers, moving from “imposing restrictions” to “providing support,” and “saving projects, but not developers” to “saving both developers and projects”.

The notice “introduced by far the most comprehensive package of support measures for the struggling property market”, he said.

Jefferies estimated that the package, along with other recent policies, would inject about 1.3 trillion yuan ($183.83 billion) of credit into the real estate sector, largely covering government bonds and developer fiduciary products. which will expire by the end of 2023.

Last week, the National Association of Capital Markets Institutional Investors announced it would expand a program to support about 250 billion yuan in debt sales by private companies, including real estate developers.

Some investors, however, remained cautious about the impact of the latest policy as regulators have already made numerous attempts to revive the real estate sector and the macro environment remains weak amid the country’s COVID restrictions.

China’s real estate sector has slowed sharply this year as the government seeks to limit excessive borrowing by developers.

The crackdown sparked a slump in house sales and prices, bond defaults and the suspension of home construction, angering homeowners who threatened to stop mortgage payments.

Private data released earlier in November showed home prices in 100 cities fell for a fourth month in October, while real estate sales by square footage fell about 20% year-on-year.

“Ultimately, the rebound in home sales is still necessary for an ultimate industry comeback,” said James Wong, portfolio manager at GaoTeng Global Asset Management Ltd.

Li Gen, CEO of Beijing BG Capital Management Ltd, which specializes in credit investing, said developers who did not default would benefit the most, but the aid would be “less meaningful” for bonds. offshore real estate, as it is still unclear how offshore financing could be improved.

Citi said the package should also help banking stocks as it eases investor concerns about developer credit risk.

Banks more exposed to developers, including Ping An Bank (000001.SZ)industrial bank (601166.SS) and China Merchants Bank (600036.SS)would particularly benefit, added Citi.

($1 = 7.0718 Chinese yuan renminbi)

Reporting by Clare Jim; Editing by Bradley Perrett and Ana Nicolaci da Costa

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