The current housing rescue measures in China are insufficient but more support will come, according to Citi Wealth’s APAC head of investment strategy Ken Peng. 

Following the recent release of disappointing property data in China, there have been concerns about whether or not the housing rescue package announced in May was sufficient to trigger a turnaround. According to Ken Peng, Citi Wealth’s head of investment strategy, APAC, there is indeed more to be desired.  

«The current program is not effective just yet but we will expect more,» Peng said at a media briefing attended by finews.asia.

Too Little, Too Expensive

Peng underlined that the size of the current package to support state-owned enterprises to buy unsold homes is too small and the 1.75 percent interest rate charged on related loans is too high. Nonetheless, he said investors should remain patient and reminded that it previously took the Federal Reserve multiple rounds of quantitative easing (QE) before the US economy felt the impact. 

«This is the beginning of QE for the property market in China. Remember that it took the Fed three times […] to really make the effects stick for the US,» Peng explained.

Structural Challenges 

But beyond the property market, Peng noted that China continued to face several long-term headwinds. Firstly, geopolitical tensions could restrain exports and tech development. Secondly, the growth outlook is challenged by an aging population. Thirdly, policy support has been focused on the supply side, rather than the demand side.

«The structural issues are pretty formidable to overcome,» Peng commented. 

Market Outlook

Nonetheless, Citi has increased allocations to China. In addition to attractive valuations, there have been noteworthy tailwinds such as securities market policy support to improve investor returns, including requirements for listed companies to lift dividends and buybacks, positive earnings forecast revisions as well as signals of further policy steps at the Third Plenum.  

In terms of China's economy, the bank has upgraded its forecast to 5.2 percent growth in 2024 and 4.8 percent growth in 2025.