As worries persist, Chinese real estate stocks have fallen by 20% from their peak in May, plunging into a technical bear market.
Investors remain skeptical of the relief measures announced by the Chinese government on May 17th, believing that the support provided by Beijing is insufficient to end the downward trend. Some quip that real estate stocks have swiftly staged a “return to where they came from” drama in just 20 days.
According to Bloomberg’s analysis of the Chinese developers’ stock index, Chinese real estate stocks fell by 3.3% on Thursday (June 6th), accumulating a nearly 21% decline since mid-May. Among them, Rongchuang saw the largest drop of 12%, while Xuhui fell by 8.4%.
Doubts about the extensive relief plan announced by the Chinese government on May 17th have led to the decline of real estate stocks after reaching high levels. Initially welcomed by investors, these policies, including reducing the down payment requirements for homebuyers, have been questioned regarding their effectiveness in stimulating demand and addressing housing oversupply.
Moreover, concerns persist about the inadequate scale of these measures. Beijing’s plan to provide 500 billion Chinese Yuan in bank loans, as announced by the People’s Bank of China, seems meager compared to the value of vacant apartments in China.
Analyst Jeff Zhang from Morningstar Company stated, “The latest sales data shows no significant improvement in the fundamentals of the real estate market. We may have to wait until the end of the year to see a slowdown in the decline or an increase in monthly sales due to government assistance programs.”
Data from China Real Estate Information Corporation shows that the sales of new houses by the top 100 real estate companies in May dropped by 33.6% year-on-year, lower than the 45% decline in April.
Joy Young, the founder of Shenzhen Unlimited Fund Management Co., mentioned they only engage in short-term investments in Chinese real estate stocks since the industry’s fundamentals remain weak.
A stock investor who invested in real estate stocks left a message on Weibo, admitting defeat, “Definitely not going to look back, increase positions, or fantasize anymore!”
Another netizen joked that this is like a cycle for real estate stocks – “returning to where they came from.” From the bullish announcement on May 17th to early June, real estate stocks swiftly plummeted back to square one.
“Thus, upon seeing good news, the first instinct should be to run!” the netizen cautioned.
Some investors are still waiting for clearer prospects of sales recovery or trying to find clues about significant policy changes that may be announced at the Third Plenum in July.