With today's 1% up-move our bogey, the Shanghai - Shenzhen CSI 300 index closed above the recent overhead resistance and at a six-month high:
From Bloomberg via Yahoo Finance, May 17:
Xi Jinping’s government announced its most forceful attempt yet to rescue the beleaguered Chinese property market, relaxing mortgage rules and urging local governments to buy unsold homes as authorities become increasingly concerned about the sector’s drag on economic growth.
The support package also includes lower down-payment requirements for homebuyers and 300 billion ($42 billion) of central bank funding to help government-backed firms buy excess inventory from developers. Those properties would then be converted into affordable housing.
While equity investors cheered the news — sending an index of developer shares up nearly 10% on Friday — it’s far from clear whether the plan to draw a line under the property crisis will be successful. The funding announced by China’s central bank is just a fraction of what some analysts say is needed to address the supply-demand mismatch in housing, and many potential buyers are waiting for prices to fall further before stepping in.
Friday’s announcement nevertheless underscored Xi’s renewed focus on propping up the world’s second-largest economy, which faces a slew of challenges from rising US tariffs to historically high youth unemployment. The question now is whether authorities can muster the right mix of financial firepower and policy adjustments to shore up confidence without returning to the speculative excesses of previous decades.
“This is a little bit similar to the bailing out of financial institutions going through the Great Financial Crisis,” Zhu Ning, a professor of finance with Shanghai Advanced Institute of Finance, said during an interview with Bloomberg TV. “But in the end unless the central government is stepping in and extends its own credit to the real estate market, it’s a little difficult or too premature for us to believe we’re out of the woods.”
The relending program is estimated to translate into 500 billion yuan of credit overall for housing buyups, the central bank said. That’s short of analysts estimates, which place required funding at 1 trillion to 5 trillion yuan — depending on the scale and speed at which the government digests housing inventory.
Markets reacted positively. The Shanghai Stock Exchange Property Index surged 6.2%. A Bloomberg gauge of Chinese developer shares jumped 9.6%, bringing gains to 16.8% this year.
It marks a new phase for Beijing’s stance on property, seven years after Xi dictated that “houses are for living in, not for speculating.” The latest measures, while potentially easing the pressure on developers, will accelerate Xi’s plans of increasing public housing.
Basket of Measures...
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