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Beijing accuses banks and developers over property market

June 23, 2014 8:30 am

Beijing accuses banks and developers over property market

By FT Reporters

China has signalled it will resist calls for aggressive measures to prop up its flagging property market, even as house prices continue to drop.

People’s Daily, the Communist party’s main mouthpiece, said in a commentary on Monday that the property market was in a “normal adjustment period” and accused domestic developers, speculators and foreign banks of exaggerating the slowdown in order to put pressure on authorities to adopt heavy-handed stimulus policies.

“We must be on guard against the ulterior motives of those who are singing short the market – to destabilise the market, mislead policy and satisfy their selfish interests,” the paper said.

Average home prices in China fell 0.2 per cent in May from April, data showed last week, the country’s first monthly decline in two years, though prices still rose 5.6 per cent on a yearly basis.

Earlier data showed sales volumes and new construction down in May. Property and related sectors such as furniture contribute about 23 per cent to China’s total economic output, Moody’s has estimated.

So far some local governments have loosened purchase restrictions as well as making it easier for home buyers to access earmarked housing funds and borrow at discounted rates. Independent analysts reckon more such steps will be taken rather than any more aggressive measures.

“The government is likely to continue the targeted loosening that we’ve seen in recent months, but major action is unlikely. Sales figures will probably stay weak for at least a few more months,” said Rosalea Yao, real estate analyst for GaveKal-Dragonomics, a Beijing-based consultancy.

People’s Daily accused property bears of trying to pressure Beijing into relaxing house purchase restrictions, loosening credit and implementing other measures to boost the market.

Some analysts have urged more aggressive action such as an interest-rate cut or a loosening of city-level restrictions that prevent buyers from purchasing second and third homes

“This way, developers can continue to enjoy profits from high prices and extend their fragile funding chains and house hoarders can also see the wealth they’re sitting on keep increasing,” the paper said.

Foreign investment banks also came in for criticism, with analysts at Morgan Stanley and Société Générale singled out for pessimistic assessments.

“As for foreign capital planning to speculate on the bottoming out of China’s property market, the practice of singing short the market while actually taking long bets has been their favourite trick for many years and is no longer surprising,” the paper said.

China has taken targeted measures in recent weeks to ease monetary conditions and boost spending on under-developed areas and other infrastructure as a way to curb the slowdown in growth.

In a sign that such efforts are bearing fruit, China factory output grew in May for the first time in six months. The HSBC/Markit Flash China Manufacturing Purchasing Managers’ Index rose to 50.8 in June from a reading of 49.4 in May. It was the first time since December that the index topped 50, the level dividing growth from contraction.

But some analysts have urged more aggressive action such as an interest-rate cut or a loosening of city-level restrictions that prevent buyers from purchasing second and third homes.

Chinese policy makers are trying to strike a balance between preventing a collapse in the property market that would spill over into the broader economy, while also not fuelling excessive price gains in a market that has already placed home ownership out of reach for many average Chinese.

 

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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