China Developer Shares Up 9.8% as Cities Ease Home-Buying

Key Takeaway

• Hangzhou and Xi'an lift all residential property purchase restrictions, sparking a surge in China developer shares by up to 9.8%.
• Nationwide easing of homebuying curbs aims to revive the market, with cities like Chengdu also removing restrictions, signaling potential for broader policy relaxation.
• Market optimism reflected in a 5.5% rise in Bloomberg Intelligence gauge of Chinese developer shares, with analysts favoring state-owned and quality private developers for investment.

Hangzhou and Xi'an Ease Restrictions

In a move that has sparked optimism among investors and developers, Hangzhou and Xi'an, two major Chinese cities, have announced the removal of all remaining curbs on residential property purchases. This decision, which ends eight-year-old restrictions, is seen as a significant step towards reviving the property demand in China. The Bloomberg gauge of China developer shares responded positively, climbing as much as 9.8% and reaching the highest level since January. Notably, Shimao Group Holdings Ltd. saw a dramatic increase, with shares rising as much as 73% in Hong Kong. Other developers like China South City Holdings Ltd. and China Aoyuan Group Ltd. also experienced jumps of more than 20%.

Nationwide Easing Trends

The easing of homebuying restrictions in Hangzhou and Xi'an is part of a broader trend across China, aimed at addressing the excess housing inventory that has contributed to the nation's property slump. The ruling Communist Party has recently committed to studying measures to tackle this issue, with cities like Chengdu also fully removing buying restrictions. This nationwide easing is expected to stimulate the real estate market, with analysts predicting that all cities, except for tier-1 cities like Beijing, Shanghai, and Shenzhen, will follow Hangzhou's lead in removing homebuying curbs.

Market Response and Analysts' Views

The market has reacted positively to these developments, with a Bloomberg Intelligence gauge of Chinese developer shares climbing 5.5% on Thursday. This uptick is part of a 28% gain since mid-April, fueled by hopes for further policy easing. Analysts like Alec Jin, investment director of Asian equities at abrdn, and Raymond Cheng, head of China property research at CGS International Securities HK, have expressed optimism regarding the government's policy actions. Cheng specifically highlighted a preference for state-owned developers such as China Overseas Land & Investment Ltd., as well as quality private firms including Longfor Group Holdings Ltd. or China Vanke Co.

Street Views

• Alec Jin, abrdn (Cautiously Optimistic on the Chinese property market):

  "We are incrementally positive on the government policy actions — that’s a big step towards the right direction."

• Raymond Cheng, CGS International Securities HK (Bullish on state-owned and quality private developers in China):

  "The latest initiatives should help improve market sentiment... The broker prefers state-owned developers such as China Overseas Land & Investment Ltd. as well as quality private firms including Longfor Group Holdings Ltd. or China Vanke Co."