China’s record mortgage rate cut fails to lift market

Agencies and staff reporter

China announced its biggest-ever reduction in the benchmark mortgage rate aimed at the property sector but the move failed to lift sentiment in stock markets significantly.

Chinese lenders slashed their five-year loan prime rate by 25 basis points to 3.95 percent, the People’s Bank of China announced yesterday. It was the first cut since June and the largest reduction since a revamp of the rate was rolled out in 2019.

The cut was also far more than analysts had expected, who had projected a reduction of 5 to 15 basis points.

Lowering that rate allows more cities in China to reduce minimum mortgage rates for homebuyers, which can stimulate sluggish demand for apartments as prices fall. The move shows an intensifying focus on measures to combat the property crisis, which has been a major drag on the world’s second-largest economy and threatens its path toward sustainable growth.

Also, the housing ministry said that 162 residential projects eligible for support have so far obtained a total of 29.4 billion yuan (HK$31.97 billion) in loans from banks as authorities ramped up efforts to boost the property sector.

The rate cut, however, failed to impress investors, with Hong Kong and China stocks both seeing muted gains yesterday. The Hang Seng Index rose 0.6 percent while the Shanghai Composite Index added 0.4 percent.

Meanwhile, the China Securities Regulatory Commission said it will take heed of all suggestions, even criticism, from market participants and address their concerns promptly, a rare gesture that underlines its resolve to shore up the nation’s stock market. The securities regulator, led by new chairman Wu Qing, will treat opinions, suggestions, and criticism from all parties seriously and implement pragmatic and feasible ones immediately, it said in a statement after holding a series of seminars with retail and institutional investors.

Wu led a visit late Monday to a branch of China Galaxy Securities in Beijing and chatted with about a dozen retail investors, the National Business Daily reported.

Additionally, the People’s Daily said China’s top financial watchdogs will keep up a campaign to ensure that the sector adheres to Communist Party values and serves the economy while avoiding “excessive” and “reckless” risks.