Property Market Chartbook, October 2021

Property market indicators show no signs of improvement so far in October. Recent announcements of property tax trials should impact sales conditions in the sector, despite regulators’ attempts to soothe recent market tensions. Developers continue scaling down land purchases to preserve cash, and local governments are delaying auctions due to weak demand. The slowdown in property construction will depress headline cyclical data in Q4 and Q1 2022.

Posted October 25, 2021
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Bond Selloff on Borrowed Time

Chinese bond yields rebounded strongly in recent days as investors scaled back their expectations of a near-term RRR cut. Some market expectations even shifted in a tightening direction given rising inflation concerns, while ignoring sharply weaker economic growth. We argue that Chinese rates will not meaningfully diverge from the macroeconomic trajectory in the coming months. Monetary easing steps via liquidity injections and interest rate cuts are more probable than additional RRR cuts. But there is some technical selling pressure as NBFI bond positions unwind. We expect 10-year CGB yields to return to the 2.8% range in the next few months and to trend lower in early 2022.

Posted October 25, 2021
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Q3 2021 China Macro Data Recap

China’s Q3 macroeconomic data will likely downgrade expectations of a quick recovery in Q4 and early 2022, given the pressures currently facing the property sector. Real GDP growth slowed to 4.9% y/y, and q/q data suggest annualized growth barely exceeding 2% so far in 2021. Slowing property and infrastructure construction and widespread power shortages depressed heavy industrial activity, while private sector credit demand remains soft. Export-oriented manufacturing is still the bright spot in the economy, with outbound shipments hitting new records in value terms, while nearly matching record volumes from earlier this year.

Posted October 18, 2021
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