KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
The shares of Chinese property developers have witnessed an unprecedented rally, following recent regulatory changes aimed at stabilizing the struggling real estate market. This surge comes as Beijing announced new measures to make home purchases easier, particularly in its tier-one cities, in a bid to counter the ongoing property market decline.
Record Gains in Real Estate Stocks
A Bloomberg Intelligence gauge of Chinese real estate stocks jumped as much as 31%, marking a record increase, in the wake of the announcement. The index has seen a remarkable 92% rise over the past five trading days. Notably, stocks of several defaulted developers, including Shimao Group Holdings Ltd and Sunac China Holdings Ltd, soared by over 200% each during this period, with Huarong International Financial Holdings Ltd experiencing a staggering 463% surge on Wednesday alone.
Market Reactions and Sentiment
The euphoria in the stock market extended to Hong Kong, where the Hang Seng China Enterprises Index rose by 8.4%, marking the 13th consecutive day of gains—the longest streak since January 2018. Analysts, such as Raymond Cheng from CGS International Securities Hong Kong, have noted that the decisive actions taken by central government officials to rescue the property market, combined with the positive effects of strong stock market rallies, are likely to boost market sentiment and lead to improved sales in the future.
Increased Bullish Activity in US Markets
In the US, trading activity for KE Holdings Inc, a proxy for China's property market, reached record levels, with nearly 146,000 call options traded on Tuesday. This surge in bullish bets included active October contracts with strike prices significantly above the previous close. The interest has driven the cost of betting on further gains to unprecedented levels compared to put options, with a ratio of four times more calls than puts outstanding.
Bond Market Dynamics
The dollar-denominated bonds of Sunac increased by up to 16% over the past five days, while bonds from Cifi Holdings Group Co climbed 9%, although they remain at distressed levels below 10 cents on the dollar. Shimao’s dollar bonds have seen limited trading activity as the company works on a debt restructuring plan.
Caution Amid Optimism
Despite the optimism surrounding recent measures, Morgan Stanley analysts have issued a warning. They suggest that while the new policies may help stabilize the property market, achieving price increases and reviving demand will be challenging. The persistent difficulties in the property sector are expected to continue to exert downward pressure on demand, keeping growth below target levels.
Conclusion
As China's property market experiences this speculative frenzy, the long-term effects of government interventions, consumer sentiment, and the underlying economic fundamentals will be crucial in determining whether this recent rally can be sustained or if it will fizzle out in the face of ongoing challenges.
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