China Commercial Property Market On The Mend, Says HSBC
CHINA – HSBC’s Group Chief Executive Noel Quinn believes that China’s commercial real estate (CRE) market is recovering after the bank registered higher-than-expected charges in Q4 2022 due to its exposure to property developers, reported Reuters on Tuesday evening (21 February, SGT).
Quinn told the news outlet that there were positive developments on the demand side and the supply side due to new policy measures. However, the sentiment in the 4th quarter was more negative than the sentiment that emerged in January 2023.
“On the demand side, the re-opening of China post COVID is going to create increased demand over time for commercial real estate. On the supply side, there were some big policy measures announced in early January to provide additional liquidity to the commercial real estate sector.”
“Encouraging signs in early January – We think that will be positive for the sector, but we thought it wise to take some additional provisions at the end of December. We have a more positive outlook now,” he added
Quinn’s comments came after HSBC saw a 92 percent jump in quarterly profit in Q4 2022 and promised more regular dividends and share buybacks.
However, HSBC said its expected credit losses nearly tripled to US$1.4 billion in the 4th quarter, surpassing the market expectations of US$1.05 billion. The credit losses were affected by charges related to its US$16.8 billion exposure to the commercial property sector of China as well as firms in the UK.
Notably, China’s real estate market performed poorly in 2022 as cash-squeezed developers were unable to complete residential projects, leading to a mortgage boycott by some home buyers. Nonetheless, market watchers expect China’s new measures, like rate cuts, to jump start a recovery in the property market by H2 2023, with data showing that the market is stabilising.
Meanwhile, Standard Chartered stated last week that it expects China’s property market to experience a “protracted recovery”. Notably, the bank’s statutory credit impairment charges surged by over two-fold to US$227 million in Q4 2022 on an annual basis. The charges included US$130 million for exposure to China’s property market.