Chinese developers Shimao, Aoyuan get stock boost as cities drop curbs, investors sense ‘major shift’ in policy support
Shares in Chinese developers jumped on Friday, led by Shimao Group, as the market expects more government stimulus for the property market after several big cities removed purchasing curbs over the past week.
Shimao soared as much as 93 per cent on Friday before closing up 60 per cent at HK$0.36, extending its rise to 75 per cent for the week – the biggest five-trading day jump since trading in the debt-laden developer resumed on July 31.
Peers China Aoyuan Group gained 28 per cent to HK$0.18 and CIFI Holdings increased 11 per cent to HK$0.40. The Hang Seng Mainland Properties Index, a gauge tracking 10 home builders, advanced 4.2 per cent.
More Chinese cities are relaxing restrictions on home purchases, with Hangzhou and Xian joining the list on Thursday, following Chengdu’s removal of such curbs last week.
As of Thursday, about 50 Chinese cities have relaxed restrictions on home purchases, with 22 of those lifting all curbs, according to data compiled by Zhuge Real Estate Research Centre. Among China’s biggest cities, only six still have restrictions in place in some areas: tier-1 cities Beijing, Shanghai, Guangzhou and Shenzhen, and tier-2 cities Tianjin and Haikou, Zhuge said.
The Riviera Garden residential property, developed by Shimao Group in Shanghai, pictured on January 8, 2022. Photo: Bloomberg
Chinese authorities have been pulling more levers to rescue the property sector, which accounts for about one third of the country’s economy. China’s Politburo on April 30 called on local authorities to digest existing housing inventory, fuelling market expectations that Beijing is moving towards an effective way of supporting the market after many rounds of piecemeal stimulus policies.
“The [Politburo] meeting highlighted a major shift in Beijing’s policy direction towards rescuing the property sector,” Ting Lu, Nomura’s chief China economist, said in a note on Friday.
“In our view, Beijing is finally on the right course to clean up the mess in the property sector … We believe Beijing will eventually be forced to rescue numerous pre-sold but unfinished residential projects, which would be a real game-changer to stem the downward spiral in the property sector.”
However, neither home prices nor sales have shown any sign of a big turnaround. Transacted home sales by the top 100 developers extended a decline in April, dropping 44.9 per cent year on year and 12.9 per cent month on month to 312 billion yuan (US$43 billion), according to research firm China Real Estate Information Corporation.
Home prices could drop as much as 6 per cent this year, ratings agency S&P Global said in a report on Monday.
Shimao in early April received a liquidation suit brought by China Construction Bank, the country’s second-largest lender, for a financial obligation amounting to around HK$1.58 billion (US$201.8 million). The company had said in late March that it was seeking to restructure US$11.7 billion worth of offshore debt in its latest efforts to avoid liquidation.
