Chinese property stocks rally in bailout – RT Business News

Chinese property stocks rally in bailout - RT Business News
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Regulators revealed financial measures that would help the sector avoid a credit crunch

Chinese property stocks and bonds rose sharply on Monday as banking regulators revealed a 16-step support package for the indebted sector.

Financial measures aimed at increasing liquidity in the real estate sector have been hailed by some analysts as a “turning point” and pushed the real estate index to its highest level in two months.

The Hang Seng Mainland Properties Index jumped more than 16%, while Hong Kong-listed Country Garden, one of China’s largest developers, gained more than 36%. Share prices of many other Chinese property developers also saw double-digit gains.

The bailout comes as the cash-strapped real estate sector, which accounts for a quarter of China’s economy, grapples with defaults and stalled projects, undermining market confidence and dampening the growth of the world’s second largest economy.

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According to some media, the 16-point relief plan presented by the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) includes loan repayment extensions. Regulators will extend a year-end deadline for lenders to cap their share of real estate lending.

The Financial Times reported, citing a document signed by the PBOC and CBIRC, that lenders “now have an indefinite period to limit the share of their outstanding mortgages with major banks to 40% of total loans and their outstanding mortgages to 32.5%.”

The move is expected to ease pressure on the industry, avoiding a credit crunch, and could affect 26% of China’s total lending.

Citi said in a note that the package signals a major shift in Chinese regulators’ policy toward developers of “impose restrictions” on “provide support”, and “save projects, but not developers” at “saving both developers and projects”.

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