Tuesday, April 20, 2010

China’s property demand likely to stay strong: HSBC

China’s demand for property is likely to remain strong even as the central government imposes tougher measures to curb property prices, according to Richard Yorke, the head of HSBC Holdings plc’s China operations.

‘The strength of the demand story in the medium term remains strong’ as more people move to urban areas and seek housing, the chief executive officer of HSBC (China) Ltd, said yesterday in Shanghai.

‘That’s one of the reasons why there’s a keenness to ensure property prices aren’t as volatile, so that the demand story and people’s ability to purchase property continues to be stronger.’

Developers’ shares tumbled yesterday after China told banks to stop loans for third-home purchases in some cities to curb property prices.

The latest measures come on top of orders to banks this year to set aside more deposits as reserves and raise mortgage rates, and steps to re-impose a sales tax on homes. The world’s third-largest economy aims to cool its property market after prices gained a record 11.7 per cent in March.

HSBC, which operates more branches in China than any other foreign bank, said that the policies will have ‘relatively limited’ impact on its home-loan business, because the majority of its lending is for first-mortgages as part of an overall wealth management service, Mr Yorke said.

‘What will be affected clearly is market sentiment,’ he said.

The China Se Shang Property Index, which tracks 34 stocks, fell 6.8 per cent as of the 3pm close, the most since Aug 19.

China Vanke Co, the nation’s biggest property developer, lost 8.2 per cent as China’s benchmark Shanghai Composite Index slumped by the most in almost eight months.

Chinese banks offered two trillion yuan (S$404.48 billion) of new loans to the property sector in 2009, including property development and home mortgages, fourfold the amount offered in the same period in 2008, according to the central bank.

New loans for home purchases rallied fivefold to 1.4 trillion yuan last year, the People’s Bank of China said.

China opened its banking industry to overseas companies in December 2006, sparking a rush among foreign banks to add outlets to compete for the nation’s US$7.2 trillion of corporate and household deposits. HSBC, Citigroup Inc and Standard Chartered plc are among those that offer yuan-denominated services for consumers in China.

‘As we look for 2010, we see opportunities across all business lines,’ Mr Yorke said. The bank this year will open at least as many as the 19 new branches it set up last year, he said.

Source: Business Times, 20 Apr 2010

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