After a week-long rally, Hong Kong-listed Chinese stocks returned on Thursday after economists were unable to accept the financial stimulus that the People’s Bank of China ( PBoC ) unveiled last week could put an end to China’s property crisis.  ,
The Hang Seng Index, a benchmark of Hong Kong companies, fell 1.5 % to close at 22, 113 on Thursday. In the six trading days following the PBoC’s announcement of a number of monetary easing measures on September 24, the index increased by 4, 196 points, or 23 %.  ,
Chinese property securities, which had gone over by 70-90 % over the past few years, even went on a rollercoaster ride in the past year.
Longfor Group decreased 9.5 % to HK$ 16.98 ( US$ 2.19 ) on Thursday after surging by 114 % in the previous six trading days. After increasing by 273 % from September 23 to October 2, Country Garden dropped 12.1 % on Thursday.  ,
Shares of Agile Group were down 15.9 % to HK$ 1.64 on Thursday after a 353 % surge. China Vanke softened 1.2 % to HK$ 11.86 after a 163 % increase.  ,
Since September 23, the Shanghai Composite Index has increased by 21 % to close at 3,335. Due to National Day breaks, the A-share marketplaces were closed the rest of the year.  ,
According to an ordinary prediction made by 25 Foreign economists who were approached by Nikkei, China’s gross domestic product is then projected to increase by 4.5 to 5.5 % for the entire year of 2024. This is down from the previous survey that was conducted in July.  ,
Of the 25 economics, 17 lowered their perspectives while nine maintained their prediction. According to Nikkei, the third quarter’s GDP growth rate for China was 4.6 %, compared to 4.9 % for the same period last year.
On September 24, the PBoC made its strategies to lower borrowing costs and increase financing to businesses.  ,
In order to provide borrowers with an additional 1 trillion yuan ( US$ 143 billion ) of loans, it initially reduced Chinese banks ‘ reserve requirement ratios by 50 basis points. Additionally, it decreased the reverse mortgage rate for 14 days by 10 base items, reaching 1.85 %.
A number of fiscal measures were introduced by the central government to encourage the desire part of the business. Additionally, it urged local institutions to rest their house laws to stop falling house prices.  ,
According to academics at PGIM, previously known as Prudential Investment Management, the lowering of second home purchase restrictions “demonstrates some willingness to expand hands of residential real estate expense.”  ,
” The intention is unlikely to revive real property to the point where it causes a private wealth consequence,” they claim. Instead, it’s likely to work to remove excess stock from the industry to prevent further decline in real estate prices.  ,
The government’s financial easing and recently announced fiscal measures, including those involving child benefit support, some child benefit assistance, and pension reform initiatives, are expected to aid China in meeting its 5 % growth target over the coming year, according to PGIM economics.  ,
They say that prior to last week’s announcements, China was growing at about 3 % annually, which is solidly below authorities ‘ stated annual growth target of 5 %.  ,
” Despite , the , current , surge , in , market , enthusiasm,  , the , lasting , effects , may have more coverage helps and take time to present,” Alicia Garcia Herrero, chief scholar in Asia Pacific region, Natixis CIB Research, says in a study review. The true test will be whether the financial underpinnings will change.
” China’s economy is now dealing with major issues , such , as , persistently , low , prices, poor real , estate , costs,  , and , declining record need,” she says”. Just after we , see actual improvements in these areas may market confidence be completely restored.”
Limitations of stimuli
Some experts speculated that the PBoC’s price reductions may cause asset bubbles and lower margins for Chinese banks.
According to Duncan Innes-Ker, senior director of Fitch Wire at Fitch Ratings,” We expect bank net interest margins ( NIMs) to remain pressure-stricken in the second half of this year and the entire year of 2025.” Although rate reductions will improve asset quality, we also anticipate a moderate increase in the number of affected loans rated banks will have as a result of the slowdown in growth in 2025.
Besides, he says Fitch’s calculations show that outstanding bonds issued by local government financing vehicles ( LGFVs ) increased by 3.1 % year-on-year in June 2024.
” We expect LGFV debts to continue to grow in 2024, albeit at a slower rate than the 8.8 % boost in 2024, “he adds.  ,
A Beijing-based author claims in an article that the PBoC’s most recent price cut is a significant step to try to improve the Chinese market but it needs more time to evaluate whether or not it will work. Policy makers does take significant steps to stop an economic sluggishness while putting an emphasis on economic reform to achieve steady long-term growth.
He recommends that the government be aware that rate increases could lead to asset bubbles and raise systemic economic risks without actually causing a rise in corporate investment.  ,
Read: China releases pleasant flood of market-friendly signal
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