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China’s Developers Surge After Interest Rate Cut: Shanghai Mover

China’s Developers Surge After Interest Rate Cut
Last month’s rate cut was the first since 2008, after imposing curbs designed to cool the property market that included higher mortgage rates and down payment requirements. Photographer: Keith Bedford/Bloomberg

China’s property shares rose the most in four months after the nation’s central bank cut interest rates for the second time in a month to bolster the country’s economic growth.

The gauge tracking developers on the Shanghai Composite Index added 3.5 percent, the most since March and the biggest gain among five industry groups on the benchmark, at the close of trading. China Vanke Co., the biggest listed developer on the mainland, climbed 3.9 percent to 9.65 yuan in Shenzhen, the highest since November 2010. Poly Real Estate Group Co., the second largest, surged 5 percent to 12.82 yuan, the highest in 2 1/2 years.

China cut its benchmark interest rates yesterday as the country moves more aggressively to promote growth. Last month’s rate cut was the first since 2008, after the government imposed curbs designed to cool the property market in the past two years that included higher mortgage rates and down-payment requirements.

“The momentum of the property market had already picked up as developers reported good June sales,” said Nicole Wong, a Hong Kong-based property analyst at CLSA Asia-Pacific Markets. “The second round of interest rates cut will just drive the momentum better and better.”

China Vanke said July 4 its contracted sales were 13.3 billion yuan ($2.1 billion) last month, a 24 percent jump from May. Longfor Properties Co. reported yesterday that June sales rose 36 percent from May.

In Hong Kong, five of the 10 best performers on the MSCI China Index were Chinese developers. Sino-Ocean Land Holdings Ltd. jumped 5 percent to a four-month high of HK$4.38. Evergrande Real Estate Group, China’s biggest developer by sales volume, rose the most in a month, adding 6.6 percent to HK$4.39.

Curbs Intact

Still, the central bank signaled the government isn’t relaxing restrictions on the property market.

“All financial institutions must continue to strictly implement a differentiated housing credit policy to continue curbing property buying for speculation and investment purposes,” the central bank said in its interest-rate statement yesterday.

Jinsong Du, a Hong Kong-based property analyst at Credit Suisse Group AG, in a note to clients yesterday wrote investors or speculators will increasingly re-enter the housing market, pushing up housing prices “meaningfully in the next few months.”

“It may trigger the government to implement new measures to curb housing prices around late September or early October, depending on the economy status,” he said.

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