Hong Kong, Shanghai stocks rally on China property support

Hong Kong and Shanghai stocks rallied Friday after China unveiled its most wide-ranging measures to support the country's battered property sector, sending real estate firms soaring.

The move provided some hope for the world's number two economy, which has been dragged by a long-running debt crisis among major developers.

However, the news was not enough to lift the rest of Asia nor Europe, which were hit by a bout of profit-taking from a recent rally and concerns that bets on a US interest rate cut may have been overdone.

Global indices have this week hit fresh highs on hopes of interest-rate cuts in the United States and elsewhere on cooler inflation.

"One day stock markets are making record highs and banking on rate cuts, the next stocks are giving back gains and rate cut expectations are being pared back," noted XTB analyst Kathleen Brooks.

"The fact that stocks are pulling back on Friday is likely to be some profit taking and is not a cause for concern."

 Plans boost China markets 

Back in Asia, Shanghai piled on one percent and Hong Kong extended its recent advance, with shares in Chinese property developers soaring.

Beijing announced it would cut the minimum down payment rate for first-time homebuyers and suggested the government could buy up commercial real estate.

Property and construction accounts for more than a quarter of China's gross domestic product but the real estate sector has been under unprecedented strain since 2020, when authorities tightened developers' access to credit in a bid to reduce mounting debt.

Major companies have teetered since then, while falling prices have dissuaded consumers from investing in property.

The crisis has put huge pressure on leaders to come up with a plan to help the sector and avoid it spreading to other parts of the economy, but most measures have left investors disappointed.

Officials announced the widest-ranging measures yet at a meeting on Friday attended by regulators, representatives of top banks, local governments and the property market.

No details were provided on how many houses would be bought.

State media also cited the central bank and the National Financial Regulatory Administration as saying they would cut the minimum down payment rate for first-time homebuyers to 15 percent, one of the country's lowest-ever rates.

The rate will be cut to 25 percent for second-home purchases, it added.

Pantheon Macro economist Duncan Wrigley gave the news a cautious welcome.

"China's new property support measures are helpful, but no magic bullet," he said.

"The new measures... are a step in the right direction and should speed up the bottoming out of upper-tier city housing markets, but the policy funding amount announced so far is disappointing and will probably need to be increased."

Key figures around 1040 GMT 

London - FTSE 100: DOWN 0.4 percent at 8,407.01 points

Paris - CAC 40: DOWN 0.4 percent at 8,156.28

Frankfurt - DAX: DOWN 0.4 percent at 18,663.88

EURO STOXX 50: DOWN 0.4 percent at 5,052.23

Hong Kong - Hang Seng Index: UP 0.9 percent at 19,553.61 (close)

Shanghai - Composite: UP 1.0 percent at 3,154.03 (close)

Tokyo - Nikkei 225: DOWN 0.3 percent at 38,787.38 (close)

New York - Dow: DOWN 0.1 percent at 39,869.38 (close)

Dollar/yen: UP at 155.88 yen from 155.39 yen on Thursday

Euro/dollar: DOWN at $1.0843 from $1.0870

Pound/dollar: DOWN at $1.2651 from $1.2670

Euro/pound: DOWN at 85.71 from 85.76 pence

Brent North Sea Crude: UP 0.1 percent at $83.33 per barrel

West Texas Intermediate: FLAT at $79.26 per barrel