HSBC says worst of China’s property crisis over after major policy correction

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Bank expects real estate market to stabilise but has reserved $500m to cover losses Bank expects real estate market to stabilise but has reserved $500m to cover losses ​  ​

China’s economy is past the worst of its property crisis, according to the chief executive of HSBC.

Noel Quinn said “the major correction is over” and said HSBC now expects the property market to stabilise.

It came even as the bank set aside $500m (£412m) to cover losses from the troubled sector and cut its forecasts for growth in the world’s second-largest economy because of the property crunch.

Mr Quinn told Bloomberg Television: “I think we are at the bottom of the market, but it will take quite a while for that market to recover and regain momentum.

“I’m not expecting a massive reversal in that sector in the next 12 months or so, but I do expect it to be a gradual improvement from where we are.”

Mr Quinn blamed a “huge policy correction” for the slump in China’s property market, which has hobbled growth in the country.

HSBC said in its third-quarter results it had set aside an additional $500m to cover expected losses on commercial property in China.

The bank also cut its forecast for GDP growth this year from 5.4pc to 5.2pc and said growth was expected to slow to 4.6pc next year, compared to an earlier forecast of 4.9pc.

Expectations were trimmed across the board “after several major real estate companies succumbed to financial distress that has precipitated a widespread loss of confidence,” the bank said.

HSBC said recent measures announced by Beijing to support the property sector “have not yet translated into a meaningful rebound in property market fundamentals, although they are expected to drive gradual stabilisation and improvement in sentiment among home buyers”.

However, credit conditions could worsen “given the continued uncertainty around liquidity support for state-owned enterprises and ongoing weakness in property market fundamentals”.

Mr Quinn’s prediction that China’s property market has bottomed out came as Evergrande, the giant Chinese property developer, was given a final chance to avoid liquidation.

A court in Hong Kong agreed to adjourn a winding-up petition until December 4 as the company seeks ways to deal with its debts.

Evergrande is the world’s most indebted developer, with 2.39 trillion yuan (£270bn) of liabilities. The company’s financial crisis has become symbolic of the wider crisis in China’s debt-ladened property sector.

Despite headwinds in China, HSBC reported pre-tax profits of $7.7bn (£6.4bn) in the third quarter of the year, more than doubling the $3.2bn earned in the same period of 2022 as higher interest rates boosted its income.

The bank also announced a $3bn share buyback. However, shares slipped 0.8pc after HSBC’s profits fell short of City forecasts.

HSBC upgraded its forecasts for the UK economy and housing market. The bank said it now expects the British economy to grow by 0.4pc next year, compared to an earlier forecast of a 0.6pc contraction. 

At the same time, house prices are set to fall by 4.7pc in 2024, it believes, not the 5.7pc projected three months ago.

 

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