Chinese stocks surge on government’s property stimulus

Chinese equities rose on Monday as Beijing pushes forward attempts to restore the nation’s struggling real estate market, while a rally in Europe fizzled owing to worries about increases in eurozone interest rates. The Hang Seng in Hong Kong increased 2.5%, driven primarily by strong gains in developer firms, while the CSI 300 index of stocks traded in Shanghai and Shenzhen closed 1.5% higher.

The actions followed Beijing’s announcement of regulations allowing for lower down payments for homebuyers in a dozen of China’s largest cities and encouraging lenders to lower interest rates on current mortgages.

The Hang Seng Mainland Properties index increased by 8.2%, led by gains of 10.5% and 8.4% for China Resources Land and Longfor Group, respectively, among other developers. The measures are intended to assist China’s once-dominant real estate market, which has languished due to low demand ever since the nation resumed normal operations after three years of stringent epidemic restrictions.

Last Monday, the Fitch Ratings agency issued a warning that the yearly decline in new home sales in China could reach 15%. If the Chinese government does decide to provide some stimulus to help the real estate market, it might signal a significant shift in market attitude.

Investors should take this as an indication that the required government intervention is likely to occur. After receiving approval from its creditors over the weekend to restructure the repayment of an over Rmb4bn ($550mn) bond that was due to mature on Saturday, Chinese real estate developer Country Garden saw a 14.6% increase in its stock price. Over the course of three years, the developer will be able to pay off the debt in a series of installments.

The improvement in China’s real estate market comes after the country’s economy posted stronger-than-anticipated economic figures last week, with a private sector survey indicating that manufacturing activity resumed expansion in August and reached its highest level since February.


Further interest rate cuts, a reduction in stock trading’s stamp fee, and fewer limitations on house acquisitions are also being implemented. These actions won’t change the economic situation overnight, but they do indicate that the present level of extreme doom surrounding China has been exaggerated.

Following the Chinese market rise, European markets initially made significant gains, but by the close, they had lost ground as Christine Lagarde, president of the European Central Bank, refrained from making any hints about the direction of interest rates in the eurozone at a London event.

The Cac 40 in France lost 0.3%, the Stoxx 600 for the entire area lost 0.1%, and the FTSE 100 lost 0.2%. The yield on 10-year German Bunds increased to 2.58 percent, up as high as 0.03 percentage points, on the government debt markets.