News Alert: A more dovish policy tone from the PBoC
- The deputy governor from the People’s Bank of China (PBoC) pledges to adopt a more proactive stance over monetary policies to stabilize credit risk and economic growth at a media briefing on Tuesday
- An expected step-up in supportive policy tone, as noted in our previous comments. PBoC’s more proactive stance and its pledge to make “pre-emptive moves” should do a favour to investor and homebuyer sentiments
- The introduction of concrete and quantifiable measures over developers’ liquidity is needed to turn recent adverse credit events, news flows and restore market confidence
- We believe market sentiment on the sector will likely remain volatile over 1Q22 as we cruise along the bond repayment peak and the upcoming weak result season in March
- We recommend investors to watch for entry opportunity at current times of volatility for names with solid land acquisition and presales outlook – COLI (688 HK), COGO (81 HK), CR Land (1109 HK) and Longfor (960 HK)
What’s new
The deputy governor from the People’s Bank of China pledges to adopt a more proactive stance over monetary policies to stabilize credit risk and economic growth at a media briefing on Tuesday.
Our view
An expected step-up in supportive policy tone… The dovish comments were made a day after the PBOC announced to cut its 1-year MLF and 7-day repo rates on Monday. As noted in our previous comments, previous policy supports have been insufficient to restore market confidence and more actions from regulators have to be introduced for sentiments to recover. PBOC’s more proactive stance and its pledge to make “pre-emptive moves” should do a favour to investor and homebuyer sentiments.
…but more concrete and substantiative measures will be required. Despite a stronger tone of support from the regulator, we believe it would require the introduction of concrete and quantifiable measures over developers’ liquidity (or hard evidence of improving liquidity positions) before market sentiments that were further dampened by recent adverse credit events and news flows can be turned and confidence to be restored.
Watch for entry opportunity for quality names that are poised for land acquisition and presales performance. Despite recent efforts from the PBoC, we believe market sentiment on the sector will likely remain volatile over 1Q22 as we cruise along the bond repayment peak and the upcoming weak result season in March unless there are introduction of more concrete policy supports. We recommend investors to watch for entry opportunity at current times of volatility for names with solid land acquisition and presales outlook – COLI (688 HK), COGO (81 HK), CR Land (1109 HK) and Longfor (960 HK)