Hui Tai (許長泰) is experiencing deja vu.
China’s surge in home prices reminds JPMorgan Asset Management’s chief Asia market strategist of last year’s stock-market mania. Spiraling leverage and implicit state support are among the common denominators, he said.
Shanghai property values jumped 31 percent in August from a year earlier, the latest data showed. Last year, a 60 percent rally in the city’s equities through June 12 was followed by a US$5 trillion rout.
Deutsche Bank Group AG warned last month that China’s housing market is in a bubble, while Goldman Sachs Group AG said this week it sees growing risks across the real-estate industry.
Home prices started to take off last year in the wake of the stock-market crash after local governments eased curbs on property purchases. In recent days, cities, including Shenzhen, have started reimposing the restrictions.
“It’s similar to the equity market where if you let things loose, it just runs like a stallion, and then you have to really rein it back, then it’s like an ice bucket challenge,” Hui said. “So you go through this extreme heat and cold. That’s not particularly good for the economy because then you’re going through very aggressive investment cycles.”
At stake is the government’s ability to channel funds trapped by capital controls into investments that can boost the economy without creating asset bubbles.
Speculative buying of commodity futures earlier this year fueled a boom that quickly unraveled, while a botched intervention to halt plummeting equities dented the credibility of policymakers and roiled global markets.
Just as the surge in stocks in the first half of last year enervated financial services and provided a fillip to an ailing economy, rampant demand for property is boosting the outlook for commodities and lifting the earnings outlook for construction-related firms.
Profits of industrial companies jumped the most in three years in August, while factory output, investment and retail sales also beat analysts’ estimates.
Medium and long-term new loans, mostly mortgages, totaled 529 billion yuan (US$79 billion) in August, while aggregate financing jumped to 1.47 trillion yuan, helping fuel a 39 percent jump in property sales by value in the first eight months.
Meanwhile, private investment in fixed assets stalled at 2.1 percent for a second straight month in August, matching a record low.
Just like last year’s equity boom, China is using credit growth to boost the economy, Deutsche Bank chief China economist Zhang Zhiwei (張智威) wrote in a report on Wednesday last week.
However, there are signs policymakers are acting to restrain growth in debt.
The People’s Bank of China has kept its benchmark lending and deposit rates on hold for nearly a year and banks’ reserve ratios remain unchanged since February, failing to deliver the additional cuts private economists had forecast in earlier surveys.
The central bank has also used longer-term tenors in the open market to drive up funding costs in a bid to rein in leverage.
Still, any winding down of debt brings its own risks.
“We saw the stock market tumble in 2015 from June throughout the second half, triggered by the unwinding of leverage after margin lending reached record highs,” JPMorgan Chase & Co vice chairman of Asia-Pacific Jing Ulrich (李晶) said. “Today, an alarming sign is that leverage is also building in the property market.”
While analysts are not predicting home prices will collapse in the manner of the stock market, last year’s experience shows the risk of allowing a leverage-fueled boom to spiral out of control.
Hui said China appears to be repeating the mistakes of the past.
“The government seems to just go through wild swings when it comes to control and let things loose because they want growth coming back,” he said.
BYPASSING CHINA TARIFFS: In the first five months of this year, Foxconn sent US$4.4bn of iPhones to the US from India, compared with US$3.7bn in the whole of last year Nearly all the iPhones exported by Foxconn Technology Group (富士康科技集團) from India went to the US between March and last month, customs data showed, far above last year’s average of 50 percent and a clear sign of Apple Inc’s efforts to bypass high US tariffs imposed on China. The numbers, being reported by Reuters for the first time, show that Apple has realigned its India exports to almost exclusively serve the US market, when previously the devices were more widely distributed to nations including the Netherlands and the Czech Republic. During March to last month, Foxconn, known as Hon Hai Precision Industry
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and the University of Tokyo (UTokyo) yesterday announced the launch of the TSMC-UTokyo Lab to promote advanced semiconductor research, education and talent development. The lab is TSMC’s first laboratory collaboration with a university outside Taiwan, the company said in a statement. The lab would leverage “the extensive knowledge, experience, and creativity” of both institutions, the company said. It is located in the Asano Section of UTokyo’s Hongo, Tokyo, campus and would be managed by UTokyo faculty, guided by directors from UTokyo and TSMC, the company said. TSMC began working with UTokyo in 2019, resulting in 21 research projects,
Taiwan’s property market is entering a freeze, with mortgage activity across the nation’s six largest cities plummeting in the first quarter, H&B Realty Co (住商不動產) said yesterday, citing mounting pressure on housing demand amid tighter lending rules and regulatory curbs. Mortgage applications in Taipei, New Taipei City, Taoyuan, Taichung, Tainan and Kaohsiung totaled 28,078 from January to March, a sharp 36.3 percent decline from 44,082 in the same period last year, the nation’s largest real-estate brokerage by franchise said, citing data from the Joint Credit Information Center (JCIC, 聯徵中心). “The simultaneous decline across all six cities reflects just how drastically the market
Ashton Hall’s morning routine involves dunking his head in iced Saratoga Spring Water. For the company that sells the bottled water — Hall’s brand of choice for drinking, brushing his teeth and submerging himself — that is fantastic news. “We’re so thankful to this incredible fitness influencer called Ashton Hall,” Saratoga owner Primo Brands Corp’s CEO Robbert Rietbroek said on an earnings call after Hall’s morning routine video went viral. “He really helped put our brand on the map.” Primo Brands, which was not affiliated with Hall when he made his video, is among the increasing number of companies benefiting from influencer
RSS