A man looks at his smartphone as he walks past the People’s Bank of China building on May 20, 2022 in Beijing.
Jiang Qiming | China News Service | beautiful pictures
While the LPR cut may provide some short-term relief, the liquidity easing alone is unlikely to lead to a change in the real estate market.
Analysts such as Navigate Commodities chief executive Atilla Widnell said the positive reaction to last week’s rate change was short-lived.
“The new monetary easing/stimulation is seen as futile as the ‘reckless horse,’ as the Chinese economy desperately needs consumers back on the streets spending money,” he said in a note.
Regarding the latest cut, David Chao, global market strategist for Asia Pacific (outside Japan) at Invesco said they alluded to the severity of the property market downturn. produce.
However, he acknowledged that these cuts will not be enough to increase liquidity.
“It sends a strong message that policymakers are willing to take stronger actions to stabilize ailing markets,” he said in a note.
“While the LPR cut may provide short-term relief, liquidity easing alone is unlikely to lead to a turnaround in the property market.”
He added that lower mortgage rates have so far not translated into higher property sales, “due to a lack of trust in major developers and the pre-sale model.”
Chao said he doesn’t expect these to be the last monetary policy amendments to come from the Chinese authorities, especially as “central and local governments have the financial tools to deliver in excess of 3,000 billion yuan to boost the real estate sector.”
While today’s rate cuts won’t be a game changer, they are for now an encouraging sign, said asset manager Joshua Crabb, head of Asia Pacific equities. Duong at Robeco said.
A more positive move, he said, would be for China to open up through changes to its Covid-19 policies, as that would be the fix the economy needs.
“For now, that’s a positive sign of the right direction… But I think people are looking for something bigger to get excited about in the markets,” Crabb told CNBC.Squawk Box Asia“in Monday.
“In short, these rate cuts … will have very little impact on the current trajectory of both the economy and the real estate sector.”
