(Bloomberg) — Chinese developers’ shares and dollar bonds extended a rally Monday, fueling broader market gains as Beijing’s property rescue measures and easing Covid controls raise hopes that the worst may be over for the world’s No. 2 economy.
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A Bloomberg Intelligence stock gauge of Chinese builders jumped as much as 16%, adding to Friday’s record 18% gain and led by Country Garden Holdings Co.’s 52% increase, its biggest ever. Developers’ junk dollar bonds also soared at least 5 cents on the dollar Monday morning, after a Bloomberg index dominated by such notes rose last week for the first time in eight weeks.
The gains offer a sign of optimism that a real estate sector rattled by slumping demand and record defaults may soon see a bottom after Beijing is said to be preparing an extensive package aimed at easing developers’ liquidity strains and reviving home purchases. These measures, together with a relaxation of Covid curbs, indicate that economic growth has returned as a top policy priority.
“We are looking at this with a more favorable outlook,” Stephen Chang, managing director and portfolio manager at Pimco Asia Ltd., said in an interview with Bloomberg TV. “There are still a lot of risks but it seems like some of the tail risk has been clipped, with at least a more supportive measure and this more pragmatic thinking now.”
The 16-point plan to boost the real estate market issued by financial regulators came on the back of an expansion of a key funding support program designed for private firms including developers to about 250 billion yuan, a move that could help developers sell more bonds and ease their liquidity woes. The latest measures range from addressing developers’ liquidity crisis to loosening down-payment requirements for homebuyers, according to people familiar with the matter.
The relaxations on both real estate and Covid policies lifted sentiment across Chinese markets, with a gauge of Chinese stocks listed in Hong Kong up a maximum of 4.6%. The offshore yuan rose as much as 0.5% to 7.06 per dollar.
“The latest move suggests the central government was worried that property sector problems will lead to systemic risk for China if not handled properly,” said Raymond Cheng, head of China and Hong Kong research at CGS-CIMB Securities.
–With assistance from Tania Chen.
(Updates prices and with fresh analyst comments)
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