Markets Live, 15 November, 2021

China’s home slump deepened in October as declines in prices, sales and property investments widened, adding pressure on authorities to stabilise the market.

New-home prices in 70 cities slid 0.25 per cent last month from September, when they fell for the first time in six years, National Bureau of Statistics figures showed Monday. Residential sales dropped 24 per cent from a year earlier, the most since last year, striking a blow for developers during what is traditionally a busy season, Bloomberg calculations based on official data showed.

The figures may add to speculation that regulators will consider easing their clampdown on leverage in the real estate industry as the property downturn risks derailing China’s economic recovery. A liquidity crisis at industry giant China Evergrande Group is spreading to its competitors, which are struggling to refinance their debts, particularly in the offshore junk dollar bond market.

“The slowdown in the property sector is the key risk for the macro outlook in the next few quarters,” Zhiwei Zhang, chief economist at Pinpoint Asset Management, wrote in a note Monday.

Falling prices may dissuade homebuyers concerned about the value of their assets, making it harder for developers to sell properties and generate much-needed cash. Last month’s drop in prices, which excludes state-subsidised housing, deepened from 0.08 per cent in September. Home values in the secondary market fell 0.32 per cent, the largest decline since February 2015.

Property firms refrained from expenditure, resulting in a widening 5.4 per cent year-on-year contraction in real estate development investments, according to Bloomberg calculations. New starts by developers, a leading indicator of investments, plunged 33 per cent from a year earlier, and their land purchases shrank 24 per cent from September.

Stock and bond markets diverged on Monday morning, as investors digested the news of a deeper property slowdown and the prospect of potential policy easing.

Shares of Chinese developers fell, with the CSI Real Estate Index sliding as much as 3%. Chinese junk dollar bonds rose, continuing a rally that began late last week after a series of articles published in state media signalled support measures are on the way to help developers tap debt markets.

Prevent Bubbles

Still, China’s banking regulator is sticking to its deleveraging line, saying late Friday that the government will continue to curb the “financialization of real estate” and prevent bubbles in the sector. It will maintain stable prices of land and housing, the China Banking and Insurance Regulatory Commission said.

Other figures released Monday pointed to the economy stabilising in October. Retail sales and industrial output beat estimates, and the jobless rate was steady.

“The government would want to limit the negative impact on the economy and…