Reported real estate fund by Chinese government unlikely to ease market concerns given limited size – J.P.Morgan

 

>>REAL-TIME UPDATES IN THE WIRE. CLICK HERE<<<

 

 

The Chinese government reportedly plans to set up a real estate fund, which could provide potential funding of up to 200 – 300 billion yuan, in hope to assuage the liquidity pressure on the property sector, and the measure, if confirmed, would be marginally positive, given the growing concerns over systematic risk in the Chinese housing market and financial stability, said JPMorgan in a note on Tuesday.

However, the funding gap to complete the property projects that are under a construction halt could be up to 1-2 trillion yuan, which is significantly larger than the funding scale of the reported real estate fund, therefore, the launch of a real estate fund will unlikely expeditiously resolve the issue or sufficiently alleviate market concerns, the bank said.

The bank anticipated that the market sentiment will only improve temporarily and the rebounding momentum will not be sustainable until there is official confirmation of the introduction of supportive policies or sequential improvement in property sales data.

Investors were advised to wait for a better entry point to accumulate shares of defensive SOEs such as China Overseas Land and Investment Limited, China Overseas Property Holdings Ltd, China Resources Land and China Resources Mixc Lifestyle Services Ltd, according to the note.