China New Stimulus Measures
According to CNN, China has introduced a new set of stimulus measures last month, aimed at revitalizing its struggling Chinese real estate market and bolstering its weakening yuan. This is part of efforts to restore confidence in the world's second-largest economy.
The key aspects of the new stimulus measures include:
Reduced Minimum Down Payments
The People's Bank of China (PBOC) and the National Administration of Financial Regulation (NAFR) jointly announced a reduction in minimum down payments for mortgages. First-time buyers now only require a 20% down payment, while second-time buyers need a 30% down payment nationwide. This marks a decrease from previous requirements, which were often in the range of 30% to 40%, in cities such as Beijing and Shanghai.
Lowered Interest Rates
Interest rates on new mortgages are being reduced by approximately 40 percentage points, following a reduction in the minimum premium to the benchmark loan prime rate by the central bank.
Renegotiation of Rates
Regulators have encouraged banks to renegotiate rates on existing mortgages for first-home purchases, starting from September 25. This move is intended to provide borrowers with lower interest expenses, potentially stimulating consumption and investment.
Commercial Banks' Deposit Rate Cuts
Several major commercial banks in China, including ICBC, China Construction Bank, and Agricultural Bank of China, have lowered their deposit rates by a range of 10 to 25 basis points. This coordinated action is aimed at facilitating banks' compliance with the new mortgage rate requirements.
Can China’s New Property Stimulus Boost Metal Prices?
According to a report by ING, there have been recent reports of a surge in home sales in Beijing and Shanghai. This can be seen as an early indication that the Chinese government's efforts to mitigate a housing slowdown may be having a positive impact.
Given that China property market significantly influences the demand for industrial metals, an improvement in the Chinese housing market could lead to increased demand for these metals.
Steel and Iron Ore Prices
ING reported that despite China's ongoing property crisis, iron ore prices managed to remain above the $100 per ton mark in August. This resilience is notable, considering that the property sector typically accounts for approximately 40% of iron ore demand in a typical year.
Over the past three weeks, iron ore prices have even surged by more than 15%. This price increase can be attributed to China's continued efforts to support the steel-intensive property sector, which includes expectations of steel mills ramping up production as the building season restarts in the coming month.
However, there remains significant uncertainty surrounding mandatory production curbs in China, which could impact the outlook for both steel and iron ore. The specifics of production cuts remain uncertain. Any significant reduction in steel output would pose bearish risks for the iron ore market, as steel production is a major driver of iron ore demand.
Copper Prices
Copper prices have experienced uncertainty and fluctuations recently, influenced by various factors including the uncertain path of US interest rate hikes and China's gradual economic recovery. While Beijing's measures to support the housing market provided some relief and helped copper recover from a mid-August low, it has struggled to maintain levels above $8,500 per ton.
The Chinese market has entered its peak demand season, which should provide some support to LME copper prices in the short term. China copper ore and concentrate imports are up 9% year-to-date, and August imports reached all-time highs, reflecting increased seasonal demand.
Nickel Prices
Nickel has emerged as the worst-performing metal on the London Metal Exchange (LME) this year, with prices experiencing a decline of over 30% year-to-date. A significant factor contributing to this price decline has been the disappointing recovery in Chinese demand, leading to nickel prices hitting a one-year low in August.
The outlook for nickel's performance remains challenging, with several factors likely to exert downward pressure on prices. These factors include a weak macroeconomic environment and a sustained market surplus. Notably, the supply from Indonesia is expected to continue surging to meet the increasing demand from the battery sector.
Trading China Metal Futures
Traders can trade Metal Futures from different exchanges through Orient Futures International Singapore. This includes LME Copper Futures, LME Nickel Futures, LME Aluminum Futures, and also DCE Iron Ore Futures.
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