Chinese property stocks sink tracking sustained fall in house prices

Investing.com-- Shares of major Chinese property developers fell sharply on Wednesday, as government data showed that a decline in Chinese house prices deepened in December, while weak economic growth data also weighed.

Hong Kong-listed shares of major developers including Sunac China Holdings Ltd (HK:1918), Longfor Properties Co Ltd (HK:0960) and China Resources Land Ltd (HK:1109) sank between 4.5% to 9%. China Vanke 's (HK:2202) Hong Kong shares fell 3.2%, while Gemdale Corp's (SS:600383) Shanghai shares sank 1.5%.

Embattled developers China Evergrande Group (HK:3333) and Country Garden Holdings Company Ltd (HK:2007)- which are both struggling to restructure their debt obligations- fell between 3.5% and 6%. Country Garden recently said it expects property market weakness to persist in 2024, and that it appointed auditor KPMG to restructure its offshore debt obligations.

Data from the National Bureau of Statistics showed that Chinese house prices fell 0.4% in December- their worst monthly drop since March 2023. Prices have also fallen for 18 of the past 20 months.

The drop pointed to sustained headwinds for the property sector, which has been reeling from a sharp decline in sales ever since the onset of the 2020 COVID-19 pandemic. Chinese developers are also grappling with a prolonged cash crunch resulting from the sales decline, which saw several major developers fall into default.

While the Chinese government has rolled out some supportive measures for local property developers- including relaxed capital raise rules, easier access to funding and looser lending conditions- the moves have so far yielded little results. Investors have now called on more targeted, fiscal measures from Beijing.

A declining property market was among the key headwinds to the Chinese economy over the past three years, given that the sector makes up roughly a quarter of overall gross domestic product.

Broader Chinese markets also sank on Wednesday, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes down about 0.9% each, while the Hang Seng index tumbled 3.4%. Sentiment towards China was battered by softer-than-expected GDP data for the fourth quarter.

While GDP still edged past the government’s 5% target for 2023, the reading presented a weak outlook for China, as the country struggles to shore up a sluggish post-COVID economic recovery.

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