China Stock Investors Say Worst Yet to Come in Property Crisis

(Bloomberg) — China’s property sector has yet to see the worst of the crisis that has cast a pall over the nation’s economy and helped drive an exodus of global funds from the world’s second-largest stock market.

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That’s the view from nine of 15 respondents in an informal Bloomberg News survey of analysts and money managers based in Hong Kong and mainland China. Six of them listed housing woes as the biggest risk for equities for the final quarter of 2023. Geopolitical tensions emerged as the second-biggest concern.

The results are a reflection of the worsening malaise in China’s real estate industry, as policymakers appear reluctant to undertake more aggressive stimulus measures lest they may fuel long-term financial risks. Sentiment has only worsened this week as worries about liquidity and weak housing demand intensified, sending a Bloomberg Intelligence gauge of property stocks to its lowest level in 12 years.

Pessimism over the property sector aside, the informal survey showed investors have otherwise turned optimistic on the overall market given a series of recent policy support measures and inexpensive valuations. Roughly around 70% of the respondents said they plan to add stock positions both onshore and in Hong Kong.

“We are in the worst of this cycle and we are not out of woods yet. It’s going to take a long time for the current property crisis to be over,” said Kenny Wen, head of investment strategy at KGI Asia Ltd. who participated in the informal poll. “Before the property crisis is properly handled, it’s unlikely for the stock market sentiment to recover meaningfully.”

Investors may be staring at an added level of uncertainty after China Evergrande Group — an indebted real estate conglomerate which sits at the center of the sector’s years-long crisis — said Thursday that its billionaire chairman Hui Ka Yan is suspected of committing crimes. Meantime, Country Garden Holdings Co., formerly China’s biggest developer, continues to fight an uphill battle to avert a public bond default.



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