Investors applaud China’s commitment to support battered real estate sector

Residential and commercial buildings are located in downtown Guangzhou, China October 7, 2017. REUTERS/Bobby Yip

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HONG KONG, March 17 (Reuters) – Chinese property stocks extended their rally on Thursday as the market applauded pledges by Beijing’s top economic leaders to shore up the ailing real estate sector amid growing pressures in the country and the foreigner.

Vice Premier Liu He, China’s economic czar, said on Wednesday the government should reduce risks in the industry and proposed measures to facilitate a new development model for the sector.

At the meeting of the Financial Stability and Development Committee, a regulatory body under the State Council, Liu called for the establishment of market-friendly policies to support the economy.

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Liu’s pledge has received broad support from other leading institutions, including the central bank and securities and currency regulators.

That sent the Hang Seng Mainland Properties Index (.HSMPI) up 14.8% by midday Thursday, versus a 5.8% gain for the main Hang Seng Index (.HSI). The sub-index had already jumped 14.7% on Wednesday.

“Stocks that rebound a lot are also ones that fell a lot before, and they’re still at low levels now,” said Thomas Kwok, head of equity business at CHIEF Securities. “Is the rally sustainable? That’s a concern because we may not see clear policies that fundamentally change the liquidity issue for developers.”

Sunac China (1918.HK), the country’s third-largest property developer by sales, jumped 47.5% to a one-week high, after losing nearly 40% this month due to health problems. debt refund.

Leading developer Country Garden (2007.HK) and struggling China Evergrande Group (3333.HK) both rose 22%.

The real estate sector, a key driver of growth, struggled for months as Beijing’s campaign to reduce high debt levels sparked a liquidity crunch among some big developers, leading to bond defaults and projects abandoned.

After Liu’s comment, the banking and insurance regulator also said on Wednesday that it would seek to stabilize land and house prices, transform the real estate sector and encourage mergers and acquisition lending so that developers buy distressed assets.

The finance ministry later said that China was putting a trial property tax project this year on ice, the official Xinhua news agency reported. Read more

Trading in real estate shares has been very volatile in recent months. They firmed at the start of this year on expectations of further easing in the sector, but fell this month on lingering worries about liquidity risks in companies. Read more

Citi, however, warned that a broad-based easing with flooded cash for real estate is nearly impossible and, despite encouraging tones on Wednesday, saw no substantial policy change.

“Recent marginal adjustments… are not a game-changer,” the investment bank said in a report. “The best thing to look forward to right now is targeted downside protection for a few (company) names through coordination with local government and financial institutions.”

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Reporting by Clare Jim; Editing by Sam Holmes

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