Chinese Central Bank Vows Mortgage Rate Cuts: Investors Respond With 'Not Enough'

In a bid to stem the mounting challenges within its real estate sector, China’s central bank, the People’s Bank of China, has launched an array of measures aimed at revitalizing the market and mitigating the cascading negative effects reverberating through both the financial sector and real economy.

Nevertheless, these actions have yet to yield the desired outcomes, raising concerns among investors.

China’s financial regulators made headlines on Thursday with a series of moves targeted at boosting the troubled property market. Notably, they have slashed down-payment requirements for both first-time and second-time home buyers and concurrently lowered interest rates on existing mortgages.

The announcement, jointly made by the People's Bank of China and the National Administration of Financial Regulation, stipulated that the minimum down payment would stand at 20% for first-time buyers and 30% for second-time buyers, according to information shared by Bloomberg.

Furthermore, the central bank endorsed a reduction in the interest rates on existing mortgages for primary homes, a decision it anticipates will alleviate interest expenses for borrowers and potentially stimulate consumption and investment, as emphasized in an official statement from the People’s Bank of China.

Latest Policy Actions In China

In a directive sent to major state-owned banks earlier this week, the world’s second-largest economy mandated significant decreases in bank deposit and mortgage rates.

To further encourage domestic stock investors, China has also announced a reduction of stamp taxes on stock trading of 50%.

In August, China’s one-year loan prime rate (LPR) was lowered to a record low of 3.45%, while the five-year rate was left unchanged.

Read also: China Takes Drastic Measures To Shield Economy From Real Estate Storm

Market Reactions: Investors Are Still Unsatisfied

Despite these moves, the response from investors is less than enthusiastic.

Major stock indices in Hong Kong, as tracked by the iShares MSCI Hong Kong Index Fund EWH, faced a decline of 0.4% on Thursday, marking a consecutive session in the red. In mainland China, the Shanghai Stock Exchange witnessed a similar downtrend of 0.5%.

Chinese stocks listed on U.S. exchanges showed a mixed performance during the morning trading session in New York. E-commerce giant Alibaba Group Holdings Ltd. BABA experienced a dip of 0.5%, while retail heavyweight JD.com Inc. JD suffered a notable drop of 2%. Search engine major Baidu, Inc. BIDU was not spared either, seeing a decrease of 1.2%. The music streaming company Tencent Music Entertainment Group TME managed to post a gain of 1%.

Delving into the electric vehicle (EV) sector, Li Auto Inc. LI held steady, while NIO Inc. NIO witnessed a positive upswing of 0.7%.

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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock.