China Goes All In As Beijing Vows To Buy Unsold Properties: Chinese Stocks Rally, Copper Hits All-Time Highs

China announces aggressive measures to boost property market, including easing mortgage rules and urging local governments to purchase unsold homes. Stocks and commodities tied to China rally in response to the news.

Xi Jinping’s government has introduced its most aggressive measures to date to rescue China’s struggling property market.

On Thursday, Beijing announced a new plan that included easing mortgage regulations and urged local governments to purchase unsold homes, reflecting the authorities’ heightened concern over the sector’s impact on economic growth.

The support package comprised several key components designed to revitalize the housing market. First-time homebuyers will benefit from reduced down-payment requirements of 15%, while second-home purchases require only 25%. Additionally, the central bank is providing 300 billion yuan ($42 billion) in funding to help government-backed firms acquire surplus inventory from developers, which will then be converted into affordable housing.

China’s finance ministry conducted the auction for the first batch of its special treasury bonds on Friday, marking the beginning of a long-anticipated stimulus program.

Zhu Ning, professor of finance at the Shanghai Advanced Institute of Finance, was interviewed by Bloomberg TV and said the current measures were somewhat similar to the bailout of financial institutions during the Great Financial Crisis. He noted that without direct intervention and credit extension by the central government to the real estate market, it was too soon to consider the crisis resolved.

In related news, recent data revealed China’s industrial production expanded by 6.7% year-on-year in April 2024, surpassing market forecasts of 5.5% and accelerating from a 4.5% increase in the previous month. Despite sluggish retail sales, which marked the weakest growth since July 2023, China’s unemployment rate fell to 5.0% in April 2024. This was the lowest rate since November 2023 and better than both the previous month’s and market estimates of 5.2%.

Chinese Stocks And Proxies Rally

Stocks and commodities tied to China rallied to the news, reflecting investors upbeat sentiment following the government measures.

The onshore Shanghai Composite Index rose by 1% to close at 3,154, while the Shenzhen Component Index gained 1.1% to 9,709.

Struggling real estate developers saw significant gains, with Greenland Holdings, Poly Real Estate and China Fortune rising by over 10% in a single day.

The Hang Seng Index climbed by 0.91%, reaching its highest level in nine and a half months. Leading the charge were property developer Country Garden Services Holdings and Ping An Insurance, which rose by 9% and 5%, respectively.

Chinese American Depository Receipts (ADR) also edged slightly higher at the U.S. market open on Friday.

Alibaba Group Holdings Ltd (NYSE:PDD) rose 0.5% and 0.9%, respectively.

On Thursday, the KraneShares CSI China Internet ETF (NYSE:KWEB), which offers exposure to Chinese tech stocks, rose 2.7%, reaching the highest level since February 2023.

Copper, one of the commodities most sensitive to the Chinese economy, surged by nearly 3% to $5 per pound, marking its strongest session since early April and reaching fresh all-time highs.

Chart: Copper Hits $5 Per Pound, Sets New Record Highs

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This image was created using artificial intelligence MidJourney.

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