Beijing's move to endorse local measures to stabilize the real estate market raised property stocks yesterday. Reuters

Mainland property shares soared on Monday, outperforming the Hong Kong and mainland stock markets on hopes that the central government will step in to support the fragile property sector.

State media reported yesterday that Beijing had endorsed local measures to stabilize the real estate market and will work out a nationwide policy based on their results.

More than a dozen cities, including Shanghai, Hangzhou and Nanjing, rolled out new measures to encourage house purchases, such as offering cash subsidies for home buyers and lowering taxes and fees for developers.

"It made sense to see a rebound, as the (mainland property) stocks had been seriously oversold, with many of them already down by 70 percent from their peaks," said Alfred Chan, a chief dealer at Cheer Pearl Investment. "Many of them had fallen to an attractive level."

China Overseas Land soared 17.7 percent to as high as HK$9.51, Guangzhou R&F Properties surged about 14 percent to a high of HK$5.87, and Country Garden jumped 19.7 percent to HK$1.94.

The property sub-index soared more than 8 percent, outpacing a 5.4 percent rise in the benchmark blue chip index in afternoon trading.

Vanke, the mainland's biggest listed property developer, jumped 5.8 percent to 7.14 yuan on Monday, outperforming a 2.9 percent rise in Shenzhen's A-share index.

"The rebound can last for a short while, but we still have to wait for some actual measures from the (central) government," said Conita Hung, head of equity research at Delta Asia Financial, adding that the underlying sentiment for the mainland property sector remains soft for the time being.

Shares of China Resources Land gained 5.6 percent, Shimao Property surged 12.6 percent and Greentown China gained more than 14 percent.

But Karl Thomson Chief Portfolio Strategist Patrick Shum remained doubtful about the prospect of the mainland property shares, saying: "Although the government lowered the transaction cost, how will prospective buyers enter the market if they are job insecure? I believe the housing demand will shrink along with a slowdown of the economy".

"In the long run," he said, "players with low gearing and large coverage, such as Chinese Overseas Land, are expected to outperform peers. In contrast, the severe market conditions are unfavorable for debt-ridden developers such as Country Garden and R&F Properties."

Reuters contributed to the story

(HK Edition 10/21/2008 page3)