Property Defaults Seen as Financing Stresses Mount: China Credit

Source:  http://www.bloomberg.com/news/2014-08-11/property-defaults-seen-as-financing-stresses-mount-china-credit.html
Property Defaults Seen as Financing Stresses Mount: China Credit

China’s stocks rose, sending the benchmark index to its biggest gain in a week, amid speculation subdued inflation will give policy makers more scope to loosen monetary policies to support growth.

Industrial Bank Co. advanced 1.5 percent and Haitong Securities Co. jumped 1.7 percent to lead gains for financial companies. China Vanke Co. and Poly Real Estate Group Co., the nation’s biggest developers, climbed at least 1.2 percent after a Beijing-based newspaper reported Shenzhen is the latest city to loosen its property curbs.

The Shanghai Composite Index (SHCOMP) rose 0.8 percent to 2,211,29 as of 10:19 a.m., while the Hang Seng China Enterprises Index (HSCEI) jumped 1.6 percent. Chinese stocks have rallied from this year’s low, with the Shanghai index rebounding 11 percent, amid signs stimulus measures such as monetary easing and accelerated infrastructure spending are helping the government to achieve its economic goals for this year. Consumer prices rose 2.3 percent in July, below China’s target of 3.5 percent for 2014.

“Inflation is low and that should leave the government with more ammunition to support the economy,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The policy front for property stocks is undoubtedly improving and there are some opportunities for the sector. Upcoming economic data will be good and at least they won’t miss market expectations.”

The CSI 300 Index added 1 percent. The Bloomberg China-US Equity Index, the measure of the most-traded U.S.-listed Chinese companies, surged 1.5 percent on Aug. 8.

Consumer prices rose at the same pace as in June and also the median estimate in a Bloomberg News survey of economists, according to the National Bureau of Statistics. Factory-gate prices fell 0.9 percent, matching projections and extending the longest stretch of declines since 1999.

Monetary Conditions

China loosened monetary conditions last quarter at the fastest pace in almost two years, a Bloomberg LP gauge showed, testing the waning effectiveness of credit in supporting economic growth.

Bloomberg’s new China Monetary Conditions Index -- a weighted average of loan growth, realinterest rates and China’s real effective exchange rate -- rose 6.71 points to 82.81 in the second quarter from the previous three months. That’s the biggest jump since the July-September period of 2012, with May and June’s numbers the first back-to-back readings above 80 since January 2012.

The bureau will release data on industrial production, investment and retail sales on Aug. 13. Factory output probably rose 9.2 percent in July from a year earlier, while retail sales growth accelerated to 12.5 percent from 12.4 percent a month earlier, according to median estimates in a Bloomberg survey.

Property Easing

The Shanghai Composite is valued at 8.1 times 12-month projected earnings, compared with the five-year average multiple of 11.2, according to data compiled by Bloomberg. Trading volumes in the index were 5.5 percent lower than the 30-day average for this time of day.

Shenzhen, a first-tier city, plans to make small adjustments to property policies and scrap limits onhome prices, the China Times reported, citing an unidentified person familiar with the matter.

Shenzhen has prepared policies to ease controls on the property market, including reducing the deed tax and lowering mortgage down payments for second home buyers, the newspaper reported. The city government held a closed-door meeting last week on the real-estate market, it said.

Jinan canceled home purchase limits last month after implementing them for more than 3 years. Hohhot in Inner Mongolia eased home-purchase limits in June, while the China Times reported in July that Wuhan city will relax rules on local residents third-home purchases.

Bourses Link

The southeastern province of Fujian asked banks to speed up approvals for mortgage lending and increase loans to developers, according to a statement on the city’s housing administration.

Pressure is increasing on Hong Kong’s exchange to provide clarity on trading rules before a link starts with Shanghai that will give foreigners unprecedented access to China’s $3.6 trillion stock market.

Investors won’t be able to sell Shanghai shares through an exchange link with Hong Kong unless they transfer the stock to a broker before trading starts that day, according to Hong Kong Exchanges & Clearing Ltd. Shares must be transferred prior to 7:30 a.m. if investors want to execute the trades, Hong Kong bourse Chairman Charles Li wrote in a blog posting published yesterday. This will allow the two exchanges to settle the trades in compliance with mainland Chinese rules, he wrote.