Chinese Property Developer Shares Surge on Stimulus Speculation

Shares of Chinese property developers surged on Monday amid speculation that the Communist Party Central Committee's Political Bureau will meet in late April to discuss loosening property policies. The rally was driven by hopes of more stimulus measures to clear inventory, boost sales, and ease home purchase restrictions.

The Hang Seng Mainland Properties Index jumped 4.3% while the CSI 300 Real Estate Index surged more than 7% in China. This helped lift the broader Hang Seng Index up 0.9% and China's blue-chip index up 1.3%. Private developers saw some of the biggest gains, with Sunac China, Shimao Group, KWG Group, Kaisa Group, Zhenro Properties, and Fantasia all gaining more than 20%. State-backed China Vanke's shares also bounced back, rising 17% in Hong Kong and 10% in Shenzhen, after investors had been dumping the company's shares and bonds in previous months due to liquidity concerns.

The city of Chengdu, a major city in southwest China with a population of 21 million, announced it would remove home-buying restrictions starting April 29 to stimulate real estate demand and contribute to economic growth. Chengdu plans to reduce land supply in areas with excess residential and commercial properties, while encouraging the conversion of spare and idle non-residential housing into low-rent homes. Other top-tier cities like Beijing and Shanghai have also eased curbs on their property markets through measures like cuts in mortgage rates and lowering the bar for home purchases.

Why this matters: China's real estate sector faces a prolonged downturn, with declining home sales and prices weighing down on economic growth and denting consumer confidence. Analysts believe that without a stabilization of the property sector, China's economic rebalancing through exports and consumption is unlikely to progress significantly. The government may eventually need to fund the completion of unfinished residential projects to rebuild confidence in developers and banks, and increase demand for raw materials, workers, and home appliances.

However, analysts expect the current rally to be short-lived, as they have not seen any signs of improvement in the fundamentals, and many of the government's policies are piecemeal in nature or have only limited short-term impact. "We have not seen any sign of improvement in the fundamentals, with property sales still dropping," said Yan Yuejin, research director of E-house China Research and Development Institute. JPMorgan analysts noted that a sustainable rally in the sector would require a meaningful sales recovery and stronger policy responses.

Key Takeaways

• Chinese property shares surged on stimulus hopes, with major indexes up over 7%.
• Chengdu and other cities eased home-buying restrictions to boost real estate demand.
• Analysts believe property sector stabilization is crucial for China's economic rebalancing.
• Government may need to fund unfinished projects to rebuild confidence in developers and banks.
• Analysts expect the rally to be short-lived due to lack of improvement in fundamentals.