Chinese property shares surge on unverified reports of meeting to revive sector

[BEIJING] A gauge of Chinese property shares jumped the most in nearly nine months, fuelled by speculation a high-level meeting will be held next week to help revive the struggling sector. 

A Bloomberg Intelligence index of the nation’s real estate stocks surged as much as 11 per cent, with Logan Group rising as much as 85 per cent in Hong Kong, and Sino-Ocean Group Holding climbing by 37 per cent.

The rally followed unverified social media reports of a possible high-level meeting that would be reminiscent of the Central Urban Work Conference held in 2015, which sought to propel urban planning and infrastructure. That event was the first of its kind in decades and was attended by President Xi Jinping, former Premier Li Keqiang and all the members of the Politburo’s standing committee.

The speculation relates to the possible resumption in the development of shanty-town areas, which triggered the purchasing of property stocks, said Shujin Chen, head of China financial and property research at Jefferies Hong Kong.

Still, such a resumption is unlikely to happen as the government may not have enough funds to support that endeavour, Chen said.

China’s property sector is mired in a protracted slump. Over the past four years, a number of major developers have defaulted on their debt as government crackdowns and faltering home-buyer sentiment have weighed on their businesses. Officials have taken a number of steps to try and revive the sector, but these have so far had only modest success. Home sales extended their slump in June, spurring calls for fresh stimulus. 

“The central government really needs to do something, especially after the disastrous June sales,” said Hao Hong, chief investment officer at Lotus Asset Management.

The market is betting China will dust off its 2015 playbook to support so called shanty-town redevelopment. Potential measures may include the government speeding up the construction of new homes, offering monetary payouts to families and pumping more money into smaller cities to bolster demand.

While the benchmark CSI 300 Index didn’t immediately respond to the 2015 meeting, the gauge did rise in the two years following its trough in 2016, driven by a number of reforms.

The broader market also jumped on Thursday (Jul 10) with the Shanghai Composite Index closing at the highest level since January 2022. The nation’s 10-year government bond rose one basis point to 1.66 per cent. Iron ore futures jumped as much as 3.6 per cent in Singapore.

Recent efforts to stabilise the stock and property markets haven’t panned out, which is why there are wide-ranging “bets on some new measures for stimulus,” said Zhu Zhenkun, a fund manager at Hainan Shire Asset Management. Efforts to redevelop shanty-towns would “rejuvenate the market and bring in liquidity,” he said. BLOOMBERG