Nov 15, 2022 - Economy & Business

China's plan to support housing lifts stocks

Data: FactSet; Chart: Axios Visuals
Data: FactSet; Chart: Axios Visuals

Signs of a government shift to support China's wobbly housing market sent Asian markets higher.

Driving the news: Country Garden Holdings Co., one of the largest residential developers in China, surged roughly 46% in Hong Kong trading Monday — and on Tuesday announced an equity offering to raise $500 million.

Why it matters: China's residential property sector contributes an estimated 25%-30% of the GDP. Its recent struggles have weighed down growth in the world's second-largest economy.

Details: Over the weekend, the Wall Street Journal reported that China's central bank and top banking regulator circulated a memo to financial institutions unwinding previous restrictions on lending to the heavily indebted housing sector.

  • The reversal of previous policies that had been intended to discipline the bloated housing sector was signed off on by Chinese leader Xi Jinping, the WSJ wrote.
  • The move was widely interpreted as an indication that the Chinese government is turning its attention to boosting the flagging economy, and is willing to use traditional tools such as boosting debt and investment.

The bottom line: The news moved global markets, with housing stocks in Hong Kong and on the mainland surging.

  • Major producers of commodities, such as iron ore miner BHP Group of Australia, and other suppliers of the key ingredient for steel, also surged.

What we're watching: Whether the shift in government posture on supporting the housing market means that a softening of the zero-COVID policy could come next.

  • Harsh lockdowns in Chinese cities to control outbreaks — such as one currently in place in the key industrial hub of Guangzhou — have been a major drag on the economy.
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