By Ambar Warrick
Investing.com-- Chinese property stocks rallied on Tuesday as the government outlined more infrastructure spending to help prevent an economic slowdown.
Hong Kong-listed stocks, including Country Garden Holdings Company Ltd (HK:2007), Longfor Properties Co Ltd (HK:0960), and China Resources Land Ltd (HK:1109) rallied between 10% and 15% after Reuters reported that the government was considering offering bond guarantees to certain property developers.
China is also planning to boost economic demand and shore up infrastructure construction in the third quarter, officials said on Wednesday. The country intends to increase the use of special local government bonds and new credit guarantees.
Their comments come after the People’s Bank of China unexpectedly cut interest rates on Monday, as it attempts to shore up economic growth.
Weak retail sales and industrial output readings on Monday also raised concerns over slowing growth in the second-largest economy.
China’s economy barely dodged a contraction in the second quarter, as it struggles with a series of damaging COVID-19 lockdowns. Despite the economic impact of the lockdowns, Beijing appears hesitant to scale back its strict zero-COVID policy.
But this has also seen the government increase its spending on infrastructure projects- a major driver of economic growth in the country.
According to Reuters, the country has issued most of the 3.45 trillion yuan in special bonds relegated to infrastructure projects.
But China’s property market, which accounts for nearly a fifth of its economy, has been struggling even before the COVID lockdowns.
A series of defaults by major developer {{0|China Evergrande (HK:3333) Group}} and its peers had severely dented investor confidence in the sector, which was once widely sought after for its steep returns.
Property developers are now also facing increased scrutiny from the populace over their solvency, which has spurred a crash in home prices.