CHINA PROPERTY MARKET WEIGHT
Interest Rate Cut To Boost Weak Property Investment
Analyst: Edison Bian/David Yang Tel: (852) 2236 6761/(8621) 54047225 ext 801
What's new
The PBOC announced 25bp symmetric cuts to the benchmark lending and deposit rates along with A 50bp RRR cut.
SIX ROUNDS OF INTEREST RATE CUT SINCE NOV-14
| Date | 5-Yr Lending Rate | Mortgage Payment Per Month* | Mortgage Saving |
| 24-Oct-15 | 4.90% | 6,544 | 138 |
| 26-Aug-15 | 5.15% | 6,683 | 140 |
| 28-Jun-15 | 5.40% | 6,823 | 141 |
| 11-May-15 | 5.65% | 6,964 | 143 |
| 01-Mar-15 | 5.90% | 7,107 | 144 |
| 22-Nov-14 | 6.15% | 7,251 |
Source: WIND, UOB KayHian
*Assume Mortgage amount Rmb1m, payment period 20 years
MORTGAGE RATE VS PROPERTY SALES
Source: PBoC, CRIC, UOB KayHian
Our view
- This is the six round of interest rate cut since Nov-14 and five years' benchmark lending rate have been reduced to 4.9% which is the lowest level in history. The monthly mortgage savings generated from the latest rate cut reached around Rmb140 for a Rmb1m housing loan with a 20-year term, and hence the rate cuts had limited impact on boosting housing demand growth.
- Thanks to current loosening credit environment, banks are supportive on mortgage lending as it is a safer business in the light of stronger consumer demand for housing loans, the loan quotas are sufficient in 4Q15 from our channel check.
- Developers are expected to benefit from lower bank borrowings and hopefully cheaper financing which can translate to better project development progress and stronger growth in GFA new starts. The ultimate goal is to drive property investment growth (grew at a weaker rate of 2.6% in 9M15) which contributes heavily to GDP growth.
- Property stocks are expected to react positively to the latest rate/RRR cuts, led by highly geared names, such as Evergrande (3333 HK, BUY) and also the healthy sales recovery progress seen across the key cities which has shored up market sentiment. We encourage profit-taking on property stocks which have recovered from the bottom, such as Shimao (813 HK, HOLD) and Sunac China (1918 HK, HOLD), but also sticking with the more defensive large players. The space for further credit easing exercises is becoming limited and this has led to limited upsides for valuation recovery.
Regards,
David Yang 杨 磊
Research Analyst
UOB Kay Hian
Tel:008621-54047225-801
Mobile:86-(0)-135 644 6767
E-mail:davidyang@uobkayhian.com
This transmission has been issued by a member of the UOB Kay Hian Group for the information of the addressee only and should not be reproduced and/or distributed to any other person. Each page attached hereto must be read in conjunction with any disclaimer which forms part of it. Unless otherwise stated, this transmission is neither an offer nor the solicitation of an offer to sell or purchase any investment. Its comments are based on information obtained from sources believed to be reliable but UOB Kay Hian Group makes no representations and accepts no responsibility or liability as to its completeness or accuracy.
