Despite the recent roll-out of a housing rescue package in China, the outcome thus far has fallen short of expectations. Do not expect a V-shaped recovery any time soon, according to BNP Paribas Wealth Management.
In May, Chinese authorities announced a housing rescue package with broad measures such as a 300 billion yuan ($41 billion) re-lending facility to support state-owned enterprises to buy unsold homes. The latest official data continued to show weakness, including a 0.7 percent decrease in new home prices – the 11th consecutive month-on-month decline and the steepest drop since October 2014.
According to Grace Tam, BNP Paribas Wealth Management’s chief investment advisor Hong Kong, more time may be needed to digest the measures.
Inventory De-Stocking
China currently has 60 million unsold apartments, according to Bloomberg Economics. BNP Paribas estimates that it could take around 20 and 30 months to clear the inventory in tier-1 and tier-2 cities, respectively.
«So, we do think we're not going to see a V-shaped recovery in the property market anytime soon but we may be able to see a stabilizing poverty market in China,» Tam said at a media briefing attended by finews.asia.
Earnings Revision
Nonetheless, the French private bank is observing some welcoming developments in Chinese equities with the downward revision in earnings per share slowing down. In fact, the Hang Seng Tech Index is already beginning to see moderately positive revisions.
«It seems that we've been seeing some kind of bottoming out in terms of the earnings revision,» Tam added.
Growth Outlook
The bank is also optimistic about the broader economic outlook, forecasting the country to grow 5.2 percent in 2024 to meet its announced target of «around 5 percent». Tam highlighted a series of announcements in recent months introducing both monetary and fiscal stimulus.
«I think the key point is we are seeing the political statements being more pro-growth than expected. And of course, a lot of focus will be on July's third plenum and whether we're going to see changes or reform,» Tam noted.
