Source: Quan Shang Guo , Author: Shi Qian

Today, behind the rise of A-shares, Hong Kong stocks, and the Renminbi, there are heavy bullish rumors, and this bullish news is closely related to the real estate sector. According to market rumors, relevant parties are considering further lowering the interest rates on existing home loans, allowing the seeking of mortgage loans for existing home loans of up to 38 trillion RMB in scale, in order to reduce the debt burden on residents and boost consumption. As of the time of publication, the above-mentioned rumors have not been officially confirmed. According to reporters from the brokerage firm China, because this matter has a relatively large impact on banks, it is not without resistance.

However, it is very obvious from the market sentiment that this expectation is already being reflected. Today, the real estate sectors in Hong Kong and A-shares have flourished across the board.

Bullish rumors

In the afternoon today, Hong Kong and A-share real estate stocks and property management stocks soared collectively. As of the time of publication, Shimao Group rose more than 14%, CIFI Holdings Group rose more than 11%, China Vanke rose more than 10%, and Sunac China rose more than 9%.

Xinyuan PM rose by nearly 15%, Y&G Services rose by nearly 13%, Shimao Services, CG Services rose by over 8%.

Correspondingly, the five major state-owned banks weakened again in the afternoon, with Bank of Communications falling by over 5%, China Construction Bank falling by more than 4%, Industrial and Commercial Bank of China, Agricultural Bank of China both falling by over 3%, Bank of China falling by nearly 2%.

There are market rumors that relevant parties are considering further lowering the interest rates on existing home loans, allowing up to 38 trillion yuan of existing home loans to seek refinancing to lower household debt burdens and boost consumption. According to the relevant plan, existing mortgage customers can renegotiate home loan rates with banks without having to wait until January next year (the usual rate adjustment time).

In addition, residents can also transfer existing mortgage loans directly to other banks and sign contracts at the latest rates, marking the first time since real estate entered a difficult phase that this operation, known as "refinancing," has been allowed.

The central bank declared last year its encouragement for commercial banks to lower interest rates on existing home loans, and some major banks have responded by rare decrease in the interest rates of existing first home loans. On this basis, regulators are increasing efforts to reduce the burden of residential mortgages.

However, insiders indicate that it is currently unclear whether the new policy will apply to all housing. Although a decrease in mortgage rates will harm the profitability of state-owned banks, there is now a new pressure to curb the economic slowdown caused by the real estate industry. So far, the above rumors have not been officially confirmed. But from the market sentiment, it is already very clear that this expectation is being reflected.

The policy expectations are becoming stronger.

Recently, from a data perspective, the economy is indeed in a somewhat negative trend.

Last week, the total transaction area of residential land in 300 cities nationwide was 4.1 million square meters, a 13% increase from the previous week, a 36% decrease from the same week last year, with an average premium rate of 1%. From the beginning of 2024 to the present, the total transaction area of residential land in 300 cities nationwide has accumulated to 120.52 million square meters, a 47% year-on-year decrease. In addition, from January to July 2024, the sales of commercial housing reached 5.333 trillion yuan, a 24.3% year-on-year decrease, narrowing by 0.7 percentage points compared to January to June; in July alone, the sales of commercial housing decreased by 18.5% year-on-year, expanding by 4.2 percentage points compared to June. In addition, from January to July, the national average selling price of commercial housing was 9849 yuan per square meter, down by 7.0% year-on-year; in July alone, the average selling price of commercial housing was 9942 yuan per square meter, falling back to below 10,000 yuan per square meter, down by 3.7% year-on-year, expanding by 3.9 percentage points compared to June.

UBS Group recently lowered its economic growth expectations for the next two years, citing the more severe than expected downturn in the real estate market, which has not yet bottomed out. UBS stated that since the end of 2022, China has relaxed policies on the real estate market, including reducing down payment requirements, lowering mortgage rates, and easing housing purchase restrictions.

UBS Group's chief economist for China, Wang Tao, pointed out that the Chinese real estate market has not yet bottomed out, and the weakening of real estate activity has had a greater impact on the overall economy than previously expected. The sluggish consumption will offset the contribution of export growth to the economy.

In this context, the market has a stronger expectation for policy measures. From the policy perspective, August is a calm period, but it is expected to continue to intensify afterwards.

Ping An International believes that the policy window period in August does not mean that the new round of policy stimulus that began in late July has run out. The government may continue to introduce incremental policy measures to stabilize the economy:

1. Monetary policy has shifted to easing, and countercyclical adjustments will continue. It is predicted that there will be a 25-50 basis points reserve requirement ratio cut within the year. If the effectiveness of the current policy stimulus is lower than expected, the central bank may further cut interest rates by 10 basis points this year.

2. Fiscal policy seems to focus more on promoting consumption and resolving risks. However, it is expected that the National Development and Reform Commission will still launch more reserve projects to prevent a sharp decline in infrastructure investment growth. The focus of consumption promotion policy may be on the implementation and effectiveness of the intensified policies in July.

3. The focus of real estate policy is still on the government's help to digest housing inventory. Currently, the progress of this policy is slow, and both the scale and method of support need to be further expanded.

Editor/Lambor