By Property stocks listed in mainland China experienced gains on Friday following the announcement that Beijing would be implementing measures to boost the economy and revive the struggling real estate sector. The People’s Bank of China and the National Administration of Financial Regulation have decided to lower the minimum down-payment requirements for both first- and second-time home buyers. Additionally, big banks such as Industrial & Commercial Bank of China and Bank of China have also revealed plans to reduce their deposit rates and mortgage rates in order to stimulate consumption and provide support to the troubled property sector.
Positive Market Response
Real estate developers such as Poly Developments & Holdings Group and China Vanke saw an increase in their stock values, rising by 1.6% and 3.1% respectively. Analysts from Nomura have noted that the relaxation of mortgage policies exceeded market expectations, indicating the government’s determination to boost property demand. However, Citigroup analyst Judy Zhang remains cautious about the effectiveness of these measures, stating that their true impact remains to be seen.
Concerns Over Net Interest Margins
Despite the positive market response to the news, there are mixed reactions from investors due to concerns over the impact on net interest margins. Bank of China experienced a slight decrease of 0.5%, while China Construction Bank remained flat. Citi has conducted stress tests and identified large banks and China Merchants Bank as potentially more vulnerable due to their higher exposure to mortgages compared to their peers.
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