China property stocks and bond prices surged on Thursday on state media reports of regulatory easing even as analysts cautioned that it’s unlikely policies to rein in sky-high house prices will be significantly changed.
A property index compiled by SWS Research jumped 5.9%. China Merchants Shekou Industrial Zone Holdings, Poly Developments and Holdings Group, and Gemdale Corporation all rose by the daily limit of 10%.
The rises were triggered by a report by the state-controlled Securities Times on Wednesday that said the upcoming debt issuance by several property firms signalled the loosening of domestic bond policies. It said several property firms disclosed plans to issue debt in the interbank market at a meeting with China’s interbank bond market regulator on Tuesday.
Banks and other institutional investors will inject much-needed capital into the property firms by way of bond investment to avoid further exacerbation of their liquidity strains, the paper added, citing a person from the industry.
Meanwhile, bonds in the sector also rebounded. The 20 Aoyuan 01 issued by China Aoyuan Group, 20 Shimao G1 by Shimao Group, and 19 Yuzhou 02 by Yuzhou Group all moved up by more than 30%, marking the strongest rebound in a day since the China Evergrande crisis triggered market panic in mid- September.
The optimism was also buoyed by a report about the loosening of property transactions in Shenyang city in northeastern China’s Liaoning province. Several property companies told Cailian Press on Wednesday they were notified of policy loosening on home purchases by migrants, the sale of newly-purchased homes, and mortgage quota – and that the changes would be effective from November 11. Shenyang’s property bureau later denied the report.
Sentiment was also boosted by Evergrande’s last-minute coupon payment and bets on a potential relaxation of curbs on finance in the sector after data showed a surge in October mortgages.
“After fine-tuning policy signals sent by authorities, we think banks began to accelerate the release of previously approved mortgages and loosened the approval process for loans to developers,” said analysts led by chief China economist Chang Jian at Barclays Bank.
‘Policies Won’t Change’
But most bankers and analysts appear convinced that China will stand firm on policies to curb developers’ excess borrowing, even if financial tweaks are made to help homebuyers and meet “reasonable demand.
Investors have been worried about wider contagion from the property sector, which has seen a string of missed offshore debt payments and sell-offs in shares and bonds as China Evergrande, the world’s most indebted developer, repeatedly lurches to the brink of default.
“There are absolutely no fundamental changes or relaxations on the property lending caps,” said a banker at a state lender in Beijing who declined to be named. “But there’s always leeway for lenders to adjust for themselves to reflect the latest guidance of ‘meeting the normal financing needs’ of both home buyers and developers.”
While some banks have accelerated disbursement of approved home loans in some cities, no fresh wave of new approvals has been granted, bankers said.
“We’re making flexible adjustments in line with the market situation, but the general direction will not change,” Zong Liang, chief researcher at Bank of China, one of the country’s biggest state lenders, said. “Our goal is very clear – we want to maintain steady development of the property market, and our policy adjustments are based on the economic situation,” he said.
PBOC Statement
In a departure from its practice of releasing mortgage data on a quarterly basis, the central bank on Wednesday issued a one-line statement to announce that new mortgage loans had jumped 40% in October from the previous month to 348.1 billion yuan ($54.5 billion). That amount was just 7% higher than the monthly average in the first nine months of the year.
Some lenders had held back issuance of home loans earlier in the year, wary of being accused of fuelling debt bubbles as regulators were cracking down on new borrowing by developers, the bankers said.
“There is no increase in (loan) quotas, but the pace of loan disbursement has been picking up,” said a banker at a state lender in Shanghai.
• By Iris Hong and Reuters.
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