Chinese property shares rally on stimulus hopes

By Clare Jim and Xie Yu

HONG KONG (Reuters) -Shares of Chinese property developers rallied on Monday on speculation more stimulus measures are likely to be unveiled this week aimed at clearing inventory, boosting sales and lifting home purchase restrictions.

Hong Kong's Hang Seng Mainland Properties Index jumped 4.3% in the morning session, while mainland China's CSI 300 Real Estate Index surged 6.9%, both to near four-month highs.

The rally appeared to be driven by speculation the Communist Party Central Committee's Political Bureau will meet in late April to discuss loosening property policies, analysts said.

Private property developers including Sunac China, and defaulted Shimao Group, KWG Group, Zhenro Properties, Fantasia and Kaisa Group, all gained more than 20%.

A Hong Kong court on Monday adjourned a hearing to liquidate Kaisa to May 27, as the Shenzhen-based developer said it aims to iron out restructuring terms in the coming four weeks.

State-backed China Vanke's shares in Hong Kong bounced 17% while its shares in Shenzhen rose 10%.

Investors have been dumping Vanke's shares and bonds in recent months on liquidity concerns. The company is due to announce its first quarter results on Monday.

CIFI shares firmed 17%, after the developer said it had reached an agreement with bondholders on an offshore debt restructuring plan.

Monday's rally followed a 14% rise in the Hong Kong mainland properties sub-index last week, which was driven in part by China's securities regulator's plans to support the financial hub's capital market development.

However, analysts expect the current rally to be short-lived.

"For now, we haven’t seen any sign of improvement in fundamentals. Property sales are still dropping," said Mark Dong, co-founder and general manager of Minority Asset Management in Hong Kong. His company has been avoiding property stocks.

"There certainly is hope that the central and local governments will introduce more supportive measures. But apart from more interest rate cuts, other measures, like capital support from local governments will be quite hard to be implemented, as we know they are facing restrained resources themselves."

New home prices in China fell at their fastest pace in more than eight years in March as developers' debt woes dragged on demand and the outlook.

Chinese authorities have been ramping up measures to prop up the troubled sector, including relaxing home purchase curbs, supporting urban village renovation, and pushing banks to quicken loan approvals to cash-strapped developers.

However, analysts say many of these policies are piecemeal in nature or have only limited short-term impact.

JPMorgan said in a note that a sustainable rally in the sector would require a meaningful sales recovery and stronger policy responses.

(Reporting by Clare Jim and Xie Yu; Additional reporting by Beijing bureau; Editing by Shri Navaratnam and Sam Holmes)