China property shares soar on Beijing stimulus, despite continued debt crisis

theguardian.com:

Chinese property shares have soared for a second day thanks to a decision by Beijing’s leadership to throw the country’s struggling real estate sector a lifeline amid growing pressures at home and abroad.

Despite a downgrade for China’s third-biggest property developer Sunac on Thursday, stocks in the sector lifted again in Hong Kong and the mainland thanks to an announcement by vice premier Liu He, China’s economic tsar, on Wednesday that the government needed to reduce risks in the industry.

In a sign of the heightened concern inside China’s Communist party leadership about the property sector and the economy in general – best illustrated by the near-collapse of the giant developer Evergrande – Liu urged the roll-out of market-friendly policies to support the economy. That pushed up the Hang Seng mainland properties index 14.8% by midday in Hong Kong on Thursday, versus a 5.8% gain in the main Hang Seng index. The sub-index had already jumped 14.7% on Wednesday.

Technology shares have also bounced back after being under pressure for months. The Hang Seng tech tracker rose more than 7% after a stunning 22% gain on Wednesday, though has still halved in value from its peaks last year.

However, some investors are concerned that the property rally is not sustainable because it comes against a backdrop of continued problems for China’s biggest developers.

Sunac China, the nation’s third-biggest property developer by sales, was downgraded to B- credit rating by the agency S&P on Thursday – making it harder to borrow money – because of concerns that it might not be able to meet its huge debt repayments of nearly $4bn due this year.

Analysts at S&P have revised Sunac China’s liquidity position downwards from “less than adequate” to