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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
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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