Property stocks, bonds soar on China’s proposal for easing

Bloomberg

Chinese property stocks and bonds rallied for a second day after the central bank pledged to use more monetary policy tools to spur the economy. The sector extended gains near the end of trading on a report that China may make it easier for firms to tap pre-sale funds deposited by homebuyers.
Country Garden Holdings Co., the country’s largest developer, led gains as shares rose more than 8% in Hong Kong, the most in four months. The company’s 6.5% note due in 2024 rose 12.9 cents on the dollar to 91 cents. Several dollar bonds were set for record one-day gains.
More broadly, Chinese sovereign bonds defied a global debt rout after the People’s Bank of China cut rates for the first time in almost two years and pledged to ease credit stress.
China is drafting rules to make it easier for developers to access cash from property presales held in escrow accounts, Reuters reported, the latest move to ease a liquidity crunch in the embattled industry.
The new rules would help developers meet debt obligations, pay suppliers and finance operations by letting them use the funds in accounts that are currently controlled by the municipal governments with no central oversight, Reuters reported.
Shares of Chinese real-estate developers rose after the central bank moves. A Bloomberg Intelligence gauge of Hong Kong and mainland-listed developers jumped 4.2%, the most in two months. The Shanghai Stock Exchange Property Index
increased for a third day.
China’s central bank pledged to use more monetary policy tools to spur the economy and ease credit stress.
The People’s Bank of China will “open monetary policy tool box wider, maintain stable overall money supply and avoid a collapse in credit,” Deputy Governor Liu Guoqiang said at a briefing in Beijing.
The central bank will roll out more policies to stabilize economic growth, front-load actions and make preemptive moves, he said. It will address common concerns in the market in a timely manner and stay ahead of the market curve, he said.
A regional unit of Sunac China Holdings Ltd. has repaid 30 million yuan ($4.7 million) of guarantee funds to Strongteam Decoration that was due December 30, according to an exchange filing from Strongteam Decoration. Strongteam had earlier said the funds had not been paid.
China’s sovereign yield curve is poised to bull steepen as the nation’s bonds extend an advance on expectations the central bank will continue cutting official rates while its global peers tighten policy.
Investors are positioning for the People’s Bank of China to lower rates further in the next few months after Monday’s decision to slice 10 basis points off its one-year policy loans — the first reduction since April 2020 — and to trim its seven-day reverse repurchase rate.
While the Federal Reserve is shifting its focus to heading off inflation, Chinese authorities are more concerned about propping up growth as they deal with the fallout from a crisis in the property market, weak private consumption and the risk of bigger coronavirus outbreaks. The PBOC is also expected to pump extra liquidity into the banking system before the Spring Festival holiday week starting Jan. 31.