China is expected to maintain its benchmark lending rates unchanged on Monday, according to a Reuters survey. However, there is increasing anticipation for a reduction in the mortgage reference rate amidst efforts by authorities to bolster the housing sector.
The Loan Prime Rate (LPR), determined monthly based on submissions from 20 designated banks to the People's Bank of China, is pivotal. A survey of 33 market analysts revealed that 27 expect no change in both the one-year and five-year LPRs, representing 82% of respondents.
Among the remaining six analysts, four foresee a stable one-year LPR but a potential decrease of 5 to 20 basis points in the five-year rate. The remaining two predict similar cuts to both rates.
Most loans in China, the world's second-largest economy, are tied to the one-year LPR, currently standing at 3.45%. The five-year LPR, crucial for mortgages, was reduced to 3.95% in February to support the property market.
In a recent move to bolster the property sector, Chinese authorities announced that local governments will purchase homes at "reasonable" prices to ensure affordable housing, as reported by Xinhua news agency on Friday. Despite strong industrial output, weak retail sales and property market challenges continue to weigh on the economy.
The People's Bank of China refrained from adjusting a key policy rate during the rollover of medium-term lending facility loans on Wednesday, citing ongoing pressure from a weakened currency, which limits monetary easing efforts.
Concerns persist over the upcoming dividend payment season for overseas-listed Chinese companies, which may necessitate foreign exchange purchases. This is expected to further depreciate the yuan, which has already weakened by 1.8% against the dollar this year. HSBC estimates that $66 billion in dividends will be distributed this year.
In light of recent measures aimed at revitalizing the struggling property market, expectations for a reduction in the mortgage reference rate have intensified. Citi analysts emphasize the importance of additional destocking efforts in the property sector and timely adjustments to Reserve Requirement Ratios (RRR) and LPR to stimulate credit demand.
Paraphrasing text from "Reuters" all rights reserved by the original author.
