Investors in China are feeling torn between recent data demonstrating a tough and competent economy of the Chinese real estate market, as well as fears that expected policies are tightening in their country. This could potentially, as predicted, lead to an increase in borrowing costs and may feat business movement.
Beijing municipal government has been discussing new policies to rein in the booming Chinese real estate market. China’s home prices have picked up again and this comes after property steps being taken in the past to ‘cool’ down the housing situation.
China’s stocks have decreased as the anxiety of fresh property cooling measures and wider monetary policy tightening hit the shares of property developers. Despite the prices of property rising in China, sales have surged, which means that the property market is currently on the way up.
China’s blue-chip CSI300 index has fallen by approximately 0.4% in trade to 3,433.53 points. In the meantime, the Shanghai Composite Index dropped by about 0.2% to 3,231.34.
An index tracking the property market toppled by nearly 2% after an increase of cities levied new property restrictions over the weekend.
Hong Kong’s stocks have increased as energy shares jumped, followed by a flow in China Shenhua Energy on the backend of stellar profit growth.
Over the past few weeks, China’s central bank increased their short-term interest rates for the third time due to the immediate awakening of the U.S. rate hike (increasing interest rates).
Local governments all over the world have been tightening their restrictions on property investment. However, China’s central government has vowed to control bank lending to the property sector, which will have huge implications for investors.
According to the Galaxy Securities in their latest strategy report, the market is feeling the panic about two major things:
1. Whether the economic recovery is sustainable
2. The reality picture of tighter liquidity
Upbeat economic data offers trading prospects for investors, but the recovery may not be very reliable when tighter liquidity begins to add pressure to the Chinese real estate market.
The Head of China strategy at UBS Securities, Gao Ting, said: “As improved economic fundamentals allow the PBOC more room to manoeuvre, we think monetary policy will remain in tightening mode for a longer period.
“As tight liquidity usually has a negative impact on the stock market, we want to keep an eye on the PBOC’s subsequent actions.”
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Written by Gemma Smith