China moves to support property lending, more measures anticipated
By Alexander Bueso
Date: Tuesday 11 Jul 2023
(Sharecast News) - Chinese authorities moved to buttress property developers by pressuring lenders to extend outstanding short-term loans.
The People's Bank of China, the country's central bank. and the National Financial Regulatory Administration, said that some loans would be extended for a year.
That included trust loans due by the end of 2024.
The PBoC and NFRA said the goal was to aid developers in delivering homes already under construction in the face of flagging demand.
But analysts stressed the benefits for cash strapped developers over the short-term and the depressing effect on activity from low liquidity.
In parallel, the China Securities Journal reported on Tuesday that authorities in Beijing were expected to "accelerate" the launch of new policies in order to foster a stable and healthy real estate market.
It also said that Beijing may roll out additional policies to strengthen business confidence among private, state-owned and foreign enterprises.
Citing research from Deutsche Bank, Stephen Innes called attention to China's debt-to-GDP ratio of almost 300%.
Nonetheless, he believed that supporting the property market would at least boost short-to-medium term stability.
That should be good for equities directly and - in particular . indirectly - by boosting fund flows from property to equities.
"We continue to believe that the HK/China equity market will rally when people fall out of love with property investing," Innes said.
"We believe that October's low was a major low, and a bull market has begun that will likely be slow but will probably surpass its prior high of 33000.
"It's odd to say that when confidence is so low, but that's also what you expect at a major low, and the initial steps to thaw the US/China relationship may be the first step in restoring foreign interest in HK/China."
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