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BLOOMBERG
Chinese real estate stocks are close to losing all the gains notched during last year’s massive reopening rally as troubles mount for the debt-laden sector.
A Bloomberg Intelligence gauge of real estate stocks trading on the mainland and in Hong Kong is less than 3% away from piercing below its end-October trough, which was the lowest since 2011. The gauge had surged 88% in less than six weeks back then as China’s move to dismantle Covid controls and a gamut of supportive measures for the property sector raised hopes for a revival.
That optimism has now been replaced with deeper fears as snowballing debt problems push even the largest developers to the brink of default. A host of measures by the authorities to boost sales has provided only fleeting support. A relentless selloff has reduced former property stars such as Country Garden Holdings Co and Sunac China Holdings Ltd into penny stocks.
China’s real estate industry is caught in a vicious cycle where failing developers make households reluctant to purchase homes, which again crimps the cash flow of companies. China’s new-home prices fell again in July, while Bloomberg reported that figures are likely far worse than what official data suggest. With more cities reporting sequential declines in new-home prices for July, “the country’s housing sentiment seems unlikely to find a bottom soon,” said BI analysts.