China’s efforts to kick-start a property sector revival are poised to have a substantial, positive impact on international stock markets and delight global investors, including on Wall Street.
Last Friday, The People’s Bank of China eased borrowing rules and slashed the reserve requirement ratio for foreign exchange deposits from the current 6% to 4%. Some of the country’s largest banks also cut interest rates on yuan deposits.
We expect the decision to ease borrowing rules and cut reserve requirements for foreign exchange deposits, plus the cutting of interest rates on deposits, will have a considerable positive impact on global stock markets as investors digest news that Beijing is being proactive on this critical economic issue.
On Monday, Hong Kong’s Hang Seng Index gained 2.5%, while mainland markets were also in positive territory, with the benchmark CSI 300 up 1.33%.
Elsewhere, Japan’s Nikkei 225 also climbed 0.7%, in Australia the S&P/ASX 200 was up 0.56% and ended at 7,318.8, while South Korea’s Kospi traded 0.81% higher.
China’s property market had been facing a crisis marked by plummeting property prices, oversupply, and a debt-laden real estate sector.
This turmoil raised concerns not only for China’s domestic economy but also for global investors with exposure to Chinese assets.
The global impact of China’s efforts to revive its property sector cannot be underestimated.
A healthy property market is a vital driver of economic growth. As China’s property sector stabilises, it will boost construction activities, create jobs, and stimulate related industries like cement, steel, and furniture. The resultant economic growth will have a positive spillover effect on global markets, especially for countries that rely on China as a major trading partner.
China’s property crisis had dented investor confidence in the country’s markets. Therefore, by addressing the issue, China is sending a reassuring message to international investors that it is committed to maintaining stability and promoting growth.
Restored confidence will, we expect, lead to increased foreign investments in Chinese assets, benefiting both domestic and global portfolios.
China’s property sector revival will offer new investment opportunities, both in the real estate market and related industries. Global investors looking for diversification and growth prospects can be expected to find China an appealing destination once again.
Since the beginning of this year, I’ve been publicly saying that Beijing will take the necessary measures to shore-up the world’s second-largest economy and that global investors must not overlook the opportunities in China if they are serious about building long-term wealth.
In short, global financial markets will be buoyed by these measures that will stabilise the critically important Chinese property market, restore investor confidence, and stimulate economic growth.
London-born Nigel Green is founder and CEO of deVere Group. Following in his father’s footstep, he entered the financial services industry as a young adult. After working in the sector for 15 years in London, he subsequently spent several years operating within the international space, before launching deVere in 2002 with a single office in Hong Kong. Today, deVere is one of the world’s largest independent financial advisory organizations, doing business in 100 countries and with more than $12bn under advisement. It specializes global financial solutions to international, local mass affluent, and high-net-worth clients. In early 2017, it was announced that deVere would launch its own private bank. In addition, deVere also confirmed it has received its own investment banking license.
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