14 May 2014
China: PBoC signals policy easing in property sector - Nomura
FXStreet (Bali) - As Zhiwei Zhang, Economist at Nomura, notes, the People's Bank of China (PBoC) held a meeting Tuesday on property sector financing issues, stating that commercial banks should "properly set mortgage rates for first-time home buyers,” "meet the demand for first-time buyers purchasing properties that are not high-end" and "expedite the approval and disbursement of mortgage loands", all suggesting that more easing measures will follow in the next few months, Zhang believes.
Key Quotes
"We view these as loosening measures by the PBoC to mitigate the decline in property sales. This is in line with our expectations (see China’s property sector overinvestment Part II: The correction has started 5 May 2014). It reflects the central government is concerned about the property sector slowdown."
"We think these measures alone are not significant enough to turn around downward momentum in the property sector, and continue to expect more easing measures in this sector, such as the removal of local resident purchase restrictions in tier 2 and 3 cities. We also expect monetary policy to be loosened with a cut in the reserve requirement ratio (RRR) by 50bp in Q2 and another cut in Q3."
"If monetary policy loosens in the next few months, which is our baseline case, we expect the property sector to stabilize and growth to recover slightly to 7.5% in H2."
"But we think policy easing will exacerbate the oversupply problem in the property sector in 2015 and growth will slow to 6.8%. If policy easing does not happen in the next few months, the property sector will weaken further and we see downside risks to our H2 GDP growth forecast, with it possibly dropping below 7%."
Key Quotes
"We view these as loosening measures by the PBoC to mitigate the decline in property sales. This is in line with our expectations (see China’s property sector overinvestment Part II: The correction has started 5 May 2014). It reflects the central government is concerned about the property sector slowdown."
"We think these measures alone are not significant enough to turn around downward momentum in the property sector, and continue to expect more easing measures in this sector, such as the removal of local resident purchase restrictions in tier 2 and 3 cities. We also expect monetary policy to be loosened with a cut in the reserve requirement ratio (RRR) by 50bp in Q2 and another cut in Q3."
"If monetary policy loosens in the next few months, which is our baseline case, we expect the property sector to stabilize and growth to recover slightly to 7.5% in H2."
"But we think policy easing will exacerbate the oversupply problem in the property sector in 2015 and growth will slow to 6.8%. If policy easing does not happen in the next few months, the property sector will weaken further and we see downside risks to our H2 GDP growth forecast, with it possibly dropping below 7%."