Yet there are strong reasons to doubt whether further easing measures are sufficient to sustain the rally in property stocks, especially given the dramatic gains over the past month. In a podcast on China on May 22, JPMorgan noted that investors still treat the country’s equity market as “guilty until proven innocent” given the succession of shocks during the past several years.
Lawrence Lu, managing director and analytical manager, Greater China property and conglomerates at S&P Global Ratings, said it was important to put the easing measures in perspective. “It’s a significant shift in the government’s stance, from restrictions to outright stimulus,” Lu said.
The stakes are high. A stabilisation in the housing market would encourage retail investors, who dominate trading in onshore shares and have so far stayed on the sidelines, to buy stocks and provide a more solid underpinning to the broader rally. This is why Beijing’s more forceful policy response, although just one of several factors influencing sentiment, offers hope for Chinese stocks.
Nicholas Spiro is a partner at Lauressa Advisory