Chinese Property Stocks Rebound on Promises of Economic Support
WHAT YOU SHOULD KNOW
- China’s Politburo vows to introduce more spending measures to bolster economic growth, with a focus on boosting domestic spending and adjusting property policies.
- Chinese stocks experienced a sharp slowdown in economic growth during the second quarter, prompting selloffs and discounted prices.
- Major property firms like Country Garden, Longfor Properties, Sunac China Holdings, and KWG Living Group saw significant gains during the rally.
On Tuesday, Chinese property stocks experienced a strong rebound after suffering recent losses, primarily due to promises of increased economic support for the struggling sector from top policymakers. The Politburo, China’s top decision-making body of the Communist Party, announced plans to implement more spending measures in the upcoming weeks to bolster economic growth. The focus will be on boosting domestic spending and adjusting property policies to support the sector. Although specific measures were not outlined, investors were encouraged by the apparent change in tone from the Chinese government.
This promise of additional stimulus comes as a response to the sharp slowdown in economic growth, with the Chinese economy showing minimal expansion in the second quarter. Following this economic data, Chinese stocks experienced a widespread sell-off and were trading at significant discounts compared to their Asian counterparts. Bargain buying into Chinese shares, particularly in the embattled property sector, contributed to the rally on Tuesday. Major property firms such as Country Garden, Longfor Properties, Sunac China Holdings, and KWG Living Group saw substantial gains during the market rebound.
Tuesday’s rally marked a recovery in major property stocks, alleviating concerns over a potential debt crisis in the sector, which had triggered significant losses in previous sessions. Country Garden, one of China’s largest property firms, was particularly affected by doubts regarding its ability to meet debt commitments, causing worries about potential cascading defaults in the industry. Despite the Chinese government’s recent reversal on funding sources for property developers and easing of most anti-COVID restrictions, the property sector has yet to show significant signs of recovery. Alongside the rebound in property stocks, broader Chinese stocks also rallied on Tuesday, with the Hang Seng index surging 3.6% and the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rising 2.6% and 1.9%, respectively.
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