Chinese developers’ shares wobble as support measures disappoint

Shares of Chinese developers wobbled on Monday as investors fretted that China’s “historic” steps to stabilize its crisis-hit property sector fell short of what is required to foster a sustainable turnaround in demand and confidence.

Hong Kong’s Hang Seng Mainland Properties Index was flat by late morning, after dropping more than 2 earlier in the session. It has gained around 18 percent so far this month after the Politburo said in an April 30 meeting that it would coordinate to clear housing inventory.

Embattled state-backed developer China Vanke rose nearly 5 percent, reversing losses in early morning, while Sunac China, a major developer which has completed offshore debt restructuring, bounced more than 3 percent. Shimao Group, China-Ocean and KWG Group, however, remained in the red.

China unveiled measures on Friday to facilitate 1 trillion yuan (US$138 billion) in extra funding and ease mortgage rules, with local governments set to buy “some” apartments.

As part of those steps, the central bank said it would set up a 300-billion-yuan (US$41.49 billion) relending facility for state-owned enterprises (SOEs) to purchase completed and unsold homes at “reasonable prices” for affordable housing.

The central bank expects the relending programme would result in 500-billion-yuan worth of bank financing.

Analysts said the central government’s decision to step in as a buyer marked an important step but noted that the size of financing on offer pales in comparison to the estimated trillions of yuan worth of housing inventory.

Macquarie economists say Beijing’s previous statements suggested 18 months of inventory clearing may be the government’s policy goal, versus the current timeframe of 28 months to clear the stock.

Achieving the policy goal will cost an estimated 2 trillion yuan, they said.

“Given its limited size and the various challenges in execution, it alone is unlikely to solve the problem,” the economists said in a report. “But it’s encouraging that policymakers are moving in this direction after failures in the previous years.”

Goldman Sachs expected it would take nine months to stabilize China’s property prices if the government launches a full-scale program to reduce inventory.

“Much depends on execution,” the U.S. investment bank said. “Despite policymakers signaling a more supportive stance, the effectiveness of any new measures will hinge on how quickly and easily they can be implemented.”