HONG KONG (AFP) – Hong Kong and Shanghai stocks rallied yesterday after China unveiled its most wide-ranging measures to support the country’s property sector, sending real estate firms soaring.
The move provided some hope for the world’s number two economy, which has been dragged by a long-running debt crisis among major developers.
However, the news was not enough to lift the rest of Asia, which was hit by a bout of profit-taking from a recent rally and concerns that bets on a United States (US) interest rate cut may have been overdone in the previous session.
Shanghai piled on one per cent, having wallowed in negative territory in the morning, while Hong Kong extended a recent advance after the plans were unveiled the plans.
Beijing said it would cut the minimum down payment rate for first-time homebuyers and suggested the government could buy up commercial real estate.
Property and construction accounts for more than a quarter of China’s gross domestic product but the real estate sector has been under unprecedented strain since 2020, when authorities tightened developers’ access to credit in a bid to reduce mounting debt.
Major companies have teetered since then, while falling prices have dissuaded consumers from investing in property.
The crisis has put huge pressure on leaders to come up with a plan to help the sector and avoid it spreading to other parts of the economy, but most measures have left investors disappointed.
Officials announced the widest-ranging measures yet at a meeting yesterday attended by regulators, representatives of top banks, local governments and the property market.
Investors welcomed the announcement with open arms. Yesterday’s news offset data showing a much-slower-than-expected rise in Chinese retail sales that revived worries about the economy.
However, while there were gains in Mumbai, Jakarta and Bangkok, other regional markets struggled.
Tokyo, Sydney, Seoul, Singapore, Manila and Wellington all fell. London, Paris and Frankfurt were all down in morning trade.
That came after all three main indexes in New York fell, having ended at record highs the day before.
Markets had rallied on Thursday after a report showing that US inflation had slowed in April fanned hopes the Federal Reserve will cut rates this year, with the first as soon as July.
But warnings about the outlook for prices tempered that optimism and saw traders lower their forecasts to one cut this year, from two tipped on Wednesday.
Three top officials at the US central bank pushed back against talk of an early cut, adding that they wanted to see more evidence that inflation was under control.
Cleveland Fed boss Loretta Mester said “incoming economic information indicates that it will take longer to gain that confidence”.
She was joined by New York counterpart John Williams, who said he saw no reason to reduce rates just now, while Richmond boss Thomas Barkin said it would take time to get inflation back to the bank’s goal of two per cent.
Their remarks were echoed by JPMorgan Chase chief Jamie Dimon, who said he was still worried about price rises.
“There are a lot of inflationary forces in front of us,” he told Bloomberg Television. “The underlying inflation may not go away the way people expect it to.”
Miller Tabak + Co’s Matt Maley was confident in the outlook for stocks.
“There is a lot of leeway for the stock market if we do see a short-term pullback soon,” he said.
“Put another way, the bulls are still fully in charge right now, and so it will take a significant reversal to stem the tide of the upside momentum.”
