Unexpected hike in China’s reserve ratio won’t immediately impact property, says daily

KUALA LUMPUR: Beijing’s increase of banks’ reserve ratio “will not likely impact immediately the real estate market though uncertainties in the sector are growing,” analysts told the Shanghai Daily.

The People’s Bank of China, the country’s central bank, raised reserve requirements for the country’s lenders by 50 basis points effective Jan 18, the central bank announced on its website on Jan 12. The current levels are 15.5% for big banks and 13.5% for smaller ones.

Some analysts say the decision revealed Beijing’s concerns that a bubble in property and stock prices would be created if loans were not reined in.

Others, however, do not quite agree. "The increase, the first since June 2008, should be viewed as a signal by the central government that it would tighten liquidity rather than a move to cool the real estate market," Hingyin Lee, director of research and advisory for east China operations at Colliers International, a real estate services provider, told the Shanghai Daily. "The plunge by real estate companies in the stock market was kind of an overreaction."

The stocks of Chinese real estate players China Vanke Co, Gemdale Corp and Poly Real Estate Group Co fell after the central bank announced the increase in reserve ratio. Their Hong Kong-listed counterparts like Agile Property Holdings Ltd, Country Garden Holdings Co and Guangzhou R&F Properties Co also fell after the announcement.

Gong Min, a research manager at Shanghai Centaline Property Consultants Ltd agreed with Lee.

"While the latest move did indicate the government might raise interest rate in the coming months -- a much tougher measure to drain the liquidity, compared with raising the bank reserve ratio -- a negative impact on the real estate market should be very limited," Gong told the daily.

Both, however, also said that a "tightening monetary stance" is adding uncertainties to the market and investors should expect policies to curb speculation and cool the sector.

"The increase in the bank reserve ratio could mark a start of a turnaround, and we may possibly see a downward correction of property prices this year," Xue Jianxiong, an analyst with E-House (China) Holdings Ltd, told the daily.

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