(Bloomberg) – Sales of new homes in China fell 29% last month, the most since July, as the latest Covid-19 outbreak threatened to prolong a real estate crisis.
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A Bloomberg index that tracks shares of Chinese developers fell 0.6% on Monday morning. High-yield dollar bonds, dominated by property companies, halted a three-week rally on Friday on fears that Shanghai’s Covid wave could hurt property sales and rental income.
“Weak homebuyer confidence remains a major headwind,” Bloomberg Intelligence analyst Kristy Hung wrote in a note Monday. “The spread of Covid adds additional near-term threats.”
Local government finance vehicles topped a list of covered bonds with the biggest drop in value last week.
Unemployment in China soars, spending drops for Covid lockdowns
Small reduction in China’s RRR could hurt mood in risky assets: CreditSights
The Chinese market “disappointed” by the reduction of the RRR: Street Wrap
Declining value of Chinese local government bond pledges
Global investors flee China fearing it could jeopardize Eclipse rewards
China’s central bank takes modest easing path despite Covid (1)
Small reduction in China’s RRR could hurt sentiment for risky assets: CreditSights (11:15 a.m. HK)
According to a report by CreditSights, the latest reduction in the People’s Bank of China’s reserve requirements is below expectations and will likely dampen investor sentiment towards the country’s risky assets, including dollar bonds.
The PBOC’s statement reflects a more cautious tone on inflation and monetary tightening in developed markets reduces the chances of additional policy rates and RRR cuts in the second quarter, analyst Zerlina Zeng wrote.
Chinese Local Government Bond Pledges Fall in Value (11:11 a.m. HK)
Chinese local government finance vehicles accounted for seven of the 10 corporate notes that saw the biggest declines last week in the pledge ratio, which determines their value as assets backing loans in the stock market. country, according to data compiled by Bloomberg. State-backed transmitters include Xiamen Rail Transit Group and Ningbo Communications Investment Holdings.
The only exception is a note issued by a unit of property developer Country Garden Holdings Co., which topped the list of denials.
China home sales fall the most since July as Covid hurts recovery (10:15 a.m. HK)
Sales in value fell 29% in March from a year earlier, according to Bloomberg calculations based on year-to-date figures released Monday by the National Bureau of Statistics.
Figures for March do not show the full impact of lockdowns in Shanghai and parts of the southern metropolis of Guangzhou that have kept potential buyers away.
China Shows Faster Growth Masking Covid Lockdowns (10:04 a.m. HK)
Gross domestic product rose 4.8% in the January-March period from a year earlier, faster than the 4% increase in the fourth quarter and above the median estimate of 4, 2% from a Bloomberg survey of economists.
March data showed a sharp deterioration in consumption, while production held steady, according to data from the National Bureau of Statistics released on Monday.
China’s Worst Mortgage Crisis in a Decade May Not Relive Thanks to Politics (7:52 a.m.)
Personal mortgages in China, down 17% in the first two months to a record high since the series began in 2012, may not recover with a series of measures to reduce down payment ratios , lower mortgage rates and ease restrictions on buying a home. Weak demand will remain a drag, while high household debt could limit room to ease mortgage restrictions, Bloomberg Intelligence analyst Kristy Hung wrote in a report on Monday.
Fear of non-realizations could also continue to dampen demand from occupiers and investors, and sentiment could only improve with a recovery in the liquidity of struggling developers. This is unlikely in the short term without stronger political support.
Global Investors Flee China Fearing It Will Jeopardize Eclipse Rewards (7:50 a.m. HK)
A growing list of risks is turning China into a potential quagmire for global investors.
The central question is what might happen in a country willing to go to great lengths to achieve the goals of its ruler. President Xi Jinping’s friendship with Russian leader Vladimir Putin has made investors more wary of China, while a strongman narrative gains momentum as the Communist Party stubbornly pursues a strategy Covid-Zero and unpredictable campaigns to regulate entire industries.
Outflows of stocks, bonds and mutual funds accelerated after Russia invaded Ukraine, while Norway’s $1.3 trillion sovereign wealth fund snubbed a Chinese clothing giant sport due to concerns about human rights abuses. U.S.-dollar private equity funds investing in China raised just $1.4 billion in the first quarter, the lowest figure since 2018 for the same period.
China’s Home Loan Campaign Will Have Limited Short-Term Impact (7:45 a.m. HK)
After regulators eased some rules on big property companies borrowing for acquisition activity, major developers and financial institutions plan to raise at least 216.92 billion yuan ($34 billion) in funds through sales M&A bonds and lines of credit.
The relatively small amount raised is also a factor behind the lack of deals, said Gary Ng, senior economist at Natixis. Chinese developers must repay or refinance nearly $90 billion in local and offshore notes the rest of this year, according to data compiled by Bloomberg.
China’s Central Bank Takes Modest Easing Path Despite Covid (7:42 a.m. HK)
The People’s Bank of China cut the reserve requirement ratio for most banks by 25 basis points, below economists’ expectations, and lowered it by 50 basis points for small lenders. He kept the key one-year interest rate unchanged, disappointing the majority of economists who had predicted a drop.
The modest action indicates the central bank’s moderation in the face of interest rate hikes in the US and elsewhere and rising inflation risks. It also suggests that easing monetary policy could have a limited effect on boosting growth when most of the pressure comes from China’s tough approach to tackling Covid infections.
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