China property stocks rise after easing of share financing rules

China’s property shares jumped on Friday after state media said authorities will ease share financing rules for certain real estate-related firms, fuelling hopes of more measures to aid the struggling sector.

The China Securities Regulatory Commission (CSRC) will allow certain companies with small property interests to raise money by selling A-shares, but the proceeds cannot be invested in the real estate business, China Securities Journal reported.

For eligible companies, real estate must not be their core business, and should not contribute more than 10% of their profit, according to the article.

China has barred its property firms or property-related firms from financing via the domestic A-share market since end-2018, including both IPOs and additional or follow-up share sales.

Some companies with real estate-related businesses, including Zhongtian Financial Group Co Ltd, Jinan high-tech development co. ltd and Shenzhen New Nanshan Holding Group Co Ltd, saw their shares surge above 5%. Analysts say these companies will likely benefit directly from the rule changes.

They said the move could aid companies which are having difficulty obtaining financing via other channels, and allow them to invest in other areas of the economy.

“The move aims to better support real financing for firms and stabilise the broader economy,” said Liu Shui, an analyst at China Index Academy.

CSRC did not immediately respond to a Reuters request for comment.

China’s central bank and banking regulator have taken steps to ease liquidity pressure in the property sector, where many companies are suffering from slumping investment and sales on top of mountains of debt.

Beijing is also seeking to stabilize markets during the ongoing, politically important Communist Party Congress.

The property sector is crucial to China’s political and economic stability, with real estate accounting for around 40% of household assets, according to analysts, and making up around a quarter of the country’s gross domestic product, the largest among all sectors.

Authors: Liangping Gao, Jason Xue, Samuel Shen, Ryan Woo, Reuters

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