China property fillip

It’s okay to be distracted by what’s going on in Eastern Europe. But investors risk missing important news that Beijing is guardedly loosening its harsh measures imposed on the property sector. The Chinese government wants to reign in excess but avoid a market collapse, like a traditional herbalist slowly and carefully sliding the weight along an old scale to locate the right balance. To help developers access liquidity, policies are being drafted to allow them to more easily withdraw from their presale proceeds, which accounted for 37 percent of funding last year. State media also suggested last week that mortgage rates in top-tier cities are coming down, by as much as 20 basis points in Guangzhou, for example, in hopes of spurring property demand. It’s a big hope. January data showed a decrease in home sales among developers ranging from 11 to 95 per cent, as can be seen in the chart below. So how long will it take for the sector to recover? Even practitioners of Chinese medicine will acknowledge that some healing processes are slower than others.

This is taken from HSBC Asset Management’s weekly “Five in Five” publication. All five notes can be found each Friday here: https://www.assetmanagement.hsbc.co.uk/en/institutional-investor/news-and-insights