Chinese property stocks surge on stimulus hopes

Chinese property developers enjoyed a strong rally on Monday, fueled by speculation that the government will unveil new stimulus measures to revive the struggling sector, as reported by Reuters.

Index gains:

Hong Kong’s Hang Seng Mainland Properties Index skyrocketed 4.3 per cent in the morning session.

Mainland China’s CSI 300 Real Estate Index soared 6.9 per cent, both reaching near four-month highs.

This surge stemmed from expectations that the Communist Party leadership will convene later in April to discuss easing property-related regulations.

Developer stocks up, Kaisa hearing delayed:

Shares of major developers like Sunac China, Shimao Group, and CIFI surged by more than 17 per cent.

A Hong Kong court postponed a hearing on liquidating Kaisa Group until May 27, offering the developer breathing room for a potential restructuring.

State-backed China Vanke also saw significant gains after facing selling pressure due to liquidity concerns.

Analysts warn that the optimism might be short-lived due to persistent underlying issues:

• Property sales continue to decline.
• Implementing effective long-term support measures may be difficult for local governments facing resource constraints.
• New home prices are experiencing their fastest decline in over eight years.

Despite the rally, the Chinese government has been actively taking steps to support the sector: relaxing home purchase restrictions, supporting urban village renovations, and encouraging banks to expedite loan approvals for developers.

However, experts believe a sustained recovery hinges on a significant improvement in property sales and more decisive and impactful policy responses

JPMorgan emphasises the need for a comprehensive strategy that addresses both sales and policy aspects.