20230109-招银国际-China_Policy_Further_policy_easing_to_boost_growth_7页_626kb

China Policy Summary

Core Content

China is implementing further policy easing measures to stimulate economic growth, with a particular focus on the property sector and private enterprises. The central government is encouraging increased borrowing among households and private businesses to boost housing sales, consumption, and capital expenditure. Additionally, local government financing vehicles (LGFVs) are being allowed to roll over their debt with longer maturities and lower rates, which is expected to reduce default risks and credit spreads for LGFV bonds.

Main Policy Measures

• Property Sector Credit Easing:

  • Policymakers have signaled further credit loosening for property developers, especially those on the "whitelist" with strong financial stability and no default records.
  • The central bank has removed the mortgage rate floor for first-time homebuyers in cities where housing prices have declined for at least three consecutive months.
  • Mortgage rates for qualified homebuyers are expected to decline in most cities.
  • There is potential for further easing of mortgage policies for second-home buyers to stimulate housing sales.

• Support for Households and Private Businesses:

  • Financial institutions are urged to provide more services to households, particularly migrants in cities, to increase demand for housing, automobiles, and services.
  • Credit supply to private businesses in both manufacturing and service sectors is being enhanced.
  • Policies include continued easing of mortgage conditions, consumer credit, and business loan supply.

• LGFV Debt Management:

  • LGFVs are allowed to roll over matured debt for longer periods with lower rates, reducing credit risks.
  • The Ministry of Finance has pledged to control the increase in local government contingent debt.

Pro-Business Attitude

• China has shown a pro-business and pragmatic stance towards the internet sector and private enterprises.
• The rectification of financial businesses of 14 online platforms is nearing completion, reducing policy uncertainty.
• The government is encouraging platform companies to lead in development, absorb labor, and compete globally.
• Credit policies are being adjusted to better support private firms, enhancing their access to capital markets.

Outlook for China's Stock Market

• The housing market recovery is expected to be gradual, with mild reflation pressure.
• China is likely to maintain an easing liquidity environment and continue credit supply expansion to support growth.
• A gradual economic recovery with mild reflation and easing liquidity is seen as positive for the stock market, especially when valuations are attractive.
• The combination of supportive policies and favorable market conditions is expected to benefit the stock market.

Economic Targets and Performance

Ratings and Recommendations

• Stock Ratings:

  • BUY: Potential return of over 15% over next 12 months.
  • HOLD: Potential return of +15% to -10% over next 12 months.
  • SELL: Potential loss of over 10% over next 12 months.
  • NOT RATED: Stock is not rated by CMBIGM.

• Industry Ratings:

  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
  • MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
  • UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Disclaimer

• This report is for informational purposes only and not tailored for individual investors.
• It is not an offer or solicitation to buy or sell any securities.
• CMBIGM does not guarantee the accuracy or completeness of the information provided.
• The report may be subject to change without notice.
• Readers are advised to consult with a professional financial advisor before making investment decisions.

Distribution Restrictions

• United Kingdom: The report is only provided to persons falling within specific legal categories.
• United States: The report is intended solely for major US institutional investors and not for general distribution.
• Singapore: The report is distributed by CMBISG, an exempt financial adviser, and is subject to Singaporean regulations.