China’s real estate stocks rebound on political support

Shares of Chinese property companies rose on Monday after a series of supportive policy announcements as regulators ramped up efforts to contain the property-sector turmoil weighing on the world’s second-largest economy.

Hong Kong-listed shares of Country Garden’s services unit rose as much as 14 percent in the morning session, while its listed parent and Longfor Properties gained as much as 6 percent and 7 percent, respectively. The Hang Seng Mainland Properties Index rose 5.4 percent in Hong Kong at midday.

Policymakers have accelerated adjustments in recent weeks to stabilize the ailing housing market, including the introduction of bailout funds and special loans to help developers complete unfinished homes, prompting a nationwide mortgage boycott.

The People’s Bank of China said on Friday it will cut the interest rate on home savings loans by 0.15 percentage points for first-time buyers starting in October, the first cut on such loans since 2015. Loans with maturities longer than five years will be cut borrowed from the government’s Housing Supply Fund will be cut to 3.1 percent, according to a PBoC statement.

The Treasury Department also unveiled a rare tax incentive for homebuyers on Friday, allowing people who buy new homes within a year of selling their previous homes to receive an income tax refund, a move intended to encourage home buying.

On Thursday, banking and insurance regulators and the PBoC eased a floor on mortgage rates for some first-time buyers. In some cities, banks can remove the floor on home equity interest rates and offer cheaper loans to support demand based on their own profitability conditions.

“The three measures . . . will remarkably support the momentum of the housing market in the fourth quarter,” said Yan Yuejin, research director of the E-house China Research and Development Institute. “They will help reduce home replacement costs and relieve homebuyers.”

But investors have lost confidence in the financial health of Chinese developers, who have defaulted on both dollar and renminbi repayment obligations. After the world’s most indebted real estate developer, Evergrande, defaulted on its debt last year, it pledged to resume all stalled projects by the end of September.

While policymakers have ramped up support for homebuyers, a lack of clarity about future action for real estate companies has added to uncertainty in the market.

Last week, Hong Kong shares of CIFI Holdings fell to a record low after the company’s chairman predicted “unprecedented” liquidity stress.

Video: Evergrande: The end of the real estate boom in China China’s real estate stocks rebound on political support

Adam Bradshaw

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