Australian housing market to experience ‘up crash’ on back of homebuilder mini-boom – investment bank | Housing

Australia’s housing market is set for an “up crash” as the government’s homebuilder subsidy scheme prompts a spike in construction that will rapidly fall away, investment bank UBS says.

George Tharenou, the chief economist at UBS in Australia, said due to the homebuilder spending spree he had increased his estimate of the number of houses that would be built in 2021 from 185,000 to 230,000 – well above the 175,000 level predicted by other economists.

House prices are likely to rise by 5-10%, but there was now a chance they would soar more than 10%, “particularly given the planned repeal of responsible lending” rules, Tharenou said in a note to clients.

The federal treasurer, Josh Frydenberg, has billed the planned repeal of the laws, which require banks to check whether customers can afford to repay loans, as a way to kickstart economic growth, but consumer groups worry it will lead people to borrow too much money.

As a result of the housing spike, Tharenou said he now thought economic growth this year would also be slightly stronger at 4.3% compared to his previous estimate of 4.2%.

However, Tharenou expects new home starts will begin to fall away after the homebuilder program ends in the second half of the year, tumbling to 160,000 in 2022. He has cut his estimate of economic growth for 2022 to a “still strong” 4%.

After a slow start, applications for payments of $25,000 available under the homebuilder scheme rocketed in the last weeks of 2020, tripling the size of the total program to more than $2bn.

Tharenou said he expected a further flood of applications for payments of $15,000 that are available until the end of March.

“Given commencement must occur within six months of contract signing, this will lead to a surge in (mainly detached) construction,” he said.

He said stronger growth increased the chance that the Reserve Bank of Australia would not extend a program of quantitative easing, or buying government bonds from banks, that it announced in November to support the economy.

This was especially true “if the surge in activity is accompanied by a sharper decline in unemployment”.

“That said, the impact of this housing boom on inflation is complicated,” he said. “Furthermore, as first home buyers move out of rentals into new/completed homes over the next year or so, there is potential oversupply that will cause further declines in rents, unless migration rebounds strongly,” he said.

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Bank Of Japan Revises Up Growth Outlook For Next Two Years

The Bank of Japan on Thursday revised its growth outlook upwards for the next two years and maintained its ultra-loose monetary policy as it warned that the pandemic makes clear forecasts less likely.

However, for the current fiscal year to March the central bank expects the economy to shrink 5.6 percent, against its October estimate of a 5.5 percent contraction.

The announcement comes with parts of the country including Tokyo and Osaka under a state of emergency that requests shops and restaurants close early until at least the start of February.

While Japan’s Covid-19 outbreak remains comparatively small, with around 4,700 deaths overall, there has been a sharp spike in cases this winter.

But the BoJ saw brighter times on the horizon in its quarterly report, published after a two-day policy meeting.

For the 12 months to March 2022 it expects growth of 3.9 percent, and 1.8 percent the following year. That compares with previous estimates of 3.6 percent and 1.6 percent, respectively.

Parts of the country including Tokyo and Osaka are under a coronavirus state of emergency

“Japan’s economy is likely to follow an improving trend with the impact of the coronavirus waning gradually, but the pace is expected to be only moderate while vigilance against Covid-19 continues,” the bank said.

The higher projected growth rates reflect “the effects of the government’s economic measures in particular”, it said, referring to huge stimulus packages approved last year.

The BoJ warned its latest forecasts were “extremely unclear” and “could change depending on the consequences of Covid-19 and the magnitude of their impact on domestic and overseas economies”.

Prices are seen falling 0.5 percent in the current year to March, but will likely rise 0.5 percent and then 0.7 percent over the next two.

The negative interest rate of 0.1 percent on bank deposits was left unchanged, as well as a policy of unlimited purchases of government bonds.

The central bank will closely monitor the impact of the virus and “will not hesitate to take additional easing measures if necessary”, it added.

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Bank of Japan lowers 2020 GDP estimate 0.1 percentage point

TOKYO — The Bank of Japan on Thursday slightly lowered its estimate for the nation’s growth for fiscal 2020 as the resurgent coronavirus pandemic and the declaration of a state of emergency have clouded the outlook for economic recovery.

The median growth forecast among the BOJ’s nine policy board members came to minus 5.6% for fiscal 2020 ending March, instead of minus 5.5% as predicted three months ago, according to the BOJ’s latest quarterly outlook report.

The median estimate for fiscal 2021 growth came to 3.9% compared with 3.6% three months ago.

Core inflation is forecast at minus 0.5% for fiscal 2020, instead of minus 0.6%, and at 0.5% for fiscal 2021 instead of 0.4%.

A state of emergency took effect on Jan. 8 to contain a new wave of infections, urging people to work remotely and stay at home at night and refrain from nonessential outings, prompting concerns about the nascent economic recovery.

In a two-day board meeting, the central bank decided to keep its ultra-loose monetary policy intact, including the short-term interest rate target of minus 0.1% and an aim of steering long-term rates to around zero. The BOJ kept its pledge to buy Japanese government debt without limit.

An exchange-traded fund purchasing program of up to 12 trillion yen ($115 billion) a year is also kept unchanged.

Last month, the bank decided to extend the 140 trillion yen emergency funding facilities by six months through the end of September.

Under the emergency funding programs, the BOJ could purchase up to 20 trillion yen in corporate bonds and commercial paper and provide as much as 120 trillion yen in interest-free funds for up to one year to commercial banks that have lent to businesses and households, and offer the banks a 0.1% interest on the balance of such loans.

As of the end of December, the BOJ has provided 51.6 trillion yen in funds to commercial banks.

Through eight years of aggressive asset buying under Gov. Haruhiko Kuroda, the BOJ has seen its balance sheet more than quadruple, and has come to own about half the Japanese government debt and about 7% of the stocks listed on the Tokyo Stock Exchange’s first section.

Kuroda took the helm in 2013, vowing to bring about 2% inflation in two years. Since then, however, core consumer inflation mostly hovered around 1% or less. With the easing campaign expected to become a prolonged battle amid the coronavirus pandemic, the BOJ said last month that it will conduct a review of the current framework to make it more sustainable and effective toward the 2% inflation goal. The results of the review will be announced in the next meeting to be held March 18-19.

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China central bank will prioritise monetary policy stability in 2021 – Xinhua

FILE PHOTO: The Chinese national flag flies at half-mast at the headquarters of the People’s Bank of China, the central bank (PBOC), as China holds a national mourning for those who died of the coronavirus disease (COVID-19), on the Qingming tomb-sweeping festival in Beijing, China April 4, 2020. REUTERS/Carlos Garcia Rawlins

January 8, 2021

BEIJING (Reuters) – China will prioritise stability in monetary policy in 2021, and any steps to exit stimulus measures will have a small impact on the economy, the Xinhua news agency on Friday quoted central bank governor Yi Gang as saying.

The central bank will use various policy tools to keep liquidity reasonably ample and ensure that the growth of broad money supply and total social financing basically matches nominal economic growth, Yi was quoted as saying.

China will provide more financial support to small firms, technological innovation and green development, Yi added.

“In 2021, monetary policy should prioritise stability to maintain … sustainability,” Yi said.

The central bank had said on Wednesday it would make its monetary policy flexible, targeted and appropriate in 2021, focusing on supporting small firms.

The bank has rolled out a raft of measures, including cuts in interest rates and reserve ratios since early-2020 to support the virus-hit economy.

But it has shifted to a steadier stance in recent months and kept its benchmark lending rate, the loan prime rate, unchanged since May.

Policy sources have said that the central bank will scale back support for the economy in 2021 and cool credit growth but that fears of derailing a recovery from a pandemic-induced slump and debt defaults are likely to prevent it from tightening any time soon.

Yi said any steps to exit stimulus measures will have a small impact on the economy this year because the central bank had refrained from adopting zero or negative interest rates.

While the ratio of China’s overall debt level increased last year as the pandemic dealt a blow to the economy, the debt ratio is likely to return to a basically stable track this year.

The rise in the ratio of China’s total debt to gross domestic product has started to slow since the third quarter of last year, Yi added without elaborating.

The Chinese Academy of Social Sciences, a government think tank, sees the macro leverage ratio jumping by about 30 percentage points in 2020 to over 270%.

Yi said China will continue to let the market play a decisive role in setting the yuan’s exchange rate in 2021, but it will keep the yuan basically stable.

The yuan was on course for its best week in two months, despite fresh measures rolled out by the central bank to ease capital inflows and slow the currency’s rally.

The currency has gained up nearly 1% against the greenback in the first week of the new year, building on a near 7% rise in 2020.

The central bank will push interest rate reforms to improve the transmission of its loan prime rate (LPR) to bank lending rates, and further liberalise deposit rates, Yi added.

China will also step up financial support for green development, Yi said, with measures including improving systems for green finance standards, developing green finance products and strengthening international cooperation in the sector.

(Reporting by Judy Hua and Kevin Yao in Beijing, Meg Shen in Hong Kong; editing by John Stonestreet, Robert Birsel and Hugh Lawson)

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Chinese watchdog to encourage rural bank mergers

January 5, 2021

BEIJING (Reuters) – China’s top banking watchdog said on Tuesday it would encourage founders of rural banks to boost capital, and would promote mergers and acquisitions in the sector to cut financial risks.

China’s Banking and Insurance Regulatory Commission (CBIRC) also said in an online notice it would encourage eligible investors, including local companies and non-bank financial institutions, to acquire and inject capital into rural banks.

“A small group of rural banks have become high-risk financial institutions in recent years due to various factors, seriously affecting and limiting their sustainable development and financial service capabilities,” the CBIRC said.

To reduce financial risks in the sector, founders of rural banks are encouraged to increase capital and stakes in those lenders, and dispose of non-performing loans.

For some high-risk rural lenders, local regulators are allowed to explore the option of turning them into branches of state-owned banks or joint-stock banks operating in the region.

For institutions where a “rescue would not be meaningful,” local CBIRC bureaus can urge founders to restructure, offer assistance to takeovers and even shut down the lender, the CBIRC said.

China had a total 1,641 rural banks at the end of September, data from the CBIRC showed, covering 1,206 counties in 31 provinces.

(Reporting by Cheng Leng and Gabriel Crossley; Editing by Andrew Heavens and Mark Potter)

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China sentences former bank chief to death in rare move

In its ruling, the Tianjin court cited the “especially enormous” size of the bribes Lai accepted, saying they exceeded 600 million yuan ($120 million) in one instance. In total, it said Lai collected or sought to collect 1.79 billion yuan over a decade in exchange for abusing his position to make investments, offer construction contracts, help with promotions and provide other favours.

He was also convicted of embezzling more than 25 million yuan in state assets and starting a second family while still married to his first wife.

Although Lai provided useful details about malfeasance by his subordinates, the seriousness of his bribe-taking and “degree of harm caused to society” were not enough to win him leniency, the court said in its ruling.

“Lai Xiaomin is lawless and greedy in the extreme,” the ruling said. “His crimes are extremely serious and must be punished severely under law.”

Huarong is one of four entities created in the 1990s to buy non-performing loans from banks, helping to revive the state-owned finance industry. Such asset management companies expanded into banking, insurance, real estate finance and other fields.

Lai was accused of squandering public money, illegally organising banquets, engaging in sexual dealings with multiple women and taking bribes, the anti-corruption agency said in 2018.

Investigators seized hundreds of millions of yuan in cash from Lai’s properties, the Chinese business news magazine Caixin reported in 2018.

Lai was one of hundreds of officials at government agencies, state companies and the military who have been detained in an anti-corruption crackdown launched in 2012.

Other senior officials snared in the crackdown include a former head of China’s insurance regulator.


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Russia’s economy to grow 3-4% in 2021 – central bank

FILE PHOTO: A medical specialist enters a pavilion of the Exhibition of Achievements of National Economy (VDNH), which was converted into a temporary hospital for people suffering from the coronavirus disease (COVID-19), in Moscow, Russia November 17, 2020. REUTERS/Maxim Shemetov

December 28, 2020

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China central bank urges Ant Group to set ‘rectification’ plan swiftly

FILE PHOTO: A thermal imaging camera is seen in front of a logo of Ant Group at the headquarters of Ant Group, an affiliate of Alibaba, in Hangzhou, Zhejiang province, China October 29, 2020. REUTERS/Aly Song/File Photo

December 27, 2020

BEIJING (Reuters) – China’s central bank urged Ant Group on Sunday to outline a concrete plan as soon as possible to meet regulatory demands and fully understand the seriousness of the “rectification” work it needs to perform.

The People’s Bank of China (PBOC) also urged Ant to rectify illegal financial activities, including in its credit, insurance and wealth management businesses, and regulate its credit rating business to protect personal information, Vice Governor Pan Gongsheng said a day after meeting with representatives of the fintech group.

Chinese regulators last month abruptly suspended Ant’s planned $37 billion initial public offering, which had been on track to be the world’s largest, just two days before its shares were due to begin trading in Shanghai and Hong Kong.

Ant did not immediately respond to an emailed request for comment.

On Thursday, authorities said they had launched an antitrust investigation into parent Alibaba Group and would summon Ant in coming days, the latest blow for Jack Ma’s e-commerce and fintech empire.

The PBOC’s demands also include that Ant be more transparent about its third-party payment transactions and not conduct unfair competition, and that its setup of financial holding companies comply with the law to ensure the capital adequacy, Pan said.

China’s annual Central Economic Work Conference, a gathering of top leaders and policymakers to chart the economy’s course in 2021, vowed this month to strengthen antimonopoly efforts and rein in “disorderly capital expansion.”

Pan said Ant must step up its risk management and maintain the continuity of its services and normal operations of its business.

During the meeting, regulators pointed out Ant’s issues including its poor corporate governance, defiance of regulatory demands, illegal regulatory arbitrary, the use of its market advantage to squeeze out competitors, and harming consumers’ legal interests, he said.

(Reporting by Stella Qiu, Cheng Leng, Yilei Sun, and Ryan Woo; Editing by William Mallard)

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Goldman Sachs, Morgan Stanley lead U.S. bank rally after stress test

December 21, 2020

By Sinéad Carew

(Reuters) – U.S. bank shares outperformed the broader market on Monday, led by Goldman Sachs and Morgan Stanley, after the Federal Reserve said stress test results meant the sector could resume stock buybacks for the first time since the coronavirus-led downturn.

The Fed said the biggest U.S. banks had enough capital to withstand over $600 billion in losses from a short, sharp economic slump, as well as a moderate longer-lasting downturn, and would now be permitted to pay out dividends and buy back stock on a limited basis.

Earlier this year, the Fed barred banks from buying back stock to help them build capital reserves because of the COVID-19 pandemic.

This was its second bank “stress test” for 2020, the first time the Fed has done two in a year since annual health checks began after the 2007-2009 global financial crisis.

Goldman shares were last up 7.2% after surpassing their January high for the first time since the COVID-crisis. Morgan Stanley was up 5.9% and trading at its highest since September 2007.

In comparison, the S&P 500 bank subsector, which does not include Goldman or Morgan Stanley, was up 3.1%.

The regulator’s decision came quicker than many investors had expected and suggested Morgan Stanley and Goldman Sachs investors were in line for bigger buybacks than the majority of the sector, according to Piper Sander analyst Jeffery Harte.

“Overall, the amount of share buybacks the Fed’s math suggests the big banks will be able to make in the first quarter of 2021 is good news for the group,” said Harte.

As for Goldman Sachs, Harte noted that investors had worried more about the bank’s dividend prospects during the pandemic.

“It’s quite a positive change from people being concerned Goldman wouldn’t be able to maintain their dividend to being able to buyback more stocks than most of the sector,” he said.

The Fed’s decision came earlier than expected and the results were a little better than expected across the board, said R.J. Grant, head of trading at Keefe, Bruyette & Woods.

“Generally people thought the Fed was going to keep restrictions in place another quarter or two,” said Grant, who also suggested investors were favoring Morgan Stanley and Goldman due to relatively cheap valuations.

Goldman’s 9.9 forward price to earnings multiple, which compares its trading price to analyst expectations for earnings per share for the next 12 months, is well below the industry median of 12.9, according to Refinitiv

Morgan Stanley’s 12.3 multiple also lags the median.

In the sector index JPMorgan Chase led gainers, up 4.8% while Citigroup climbed 3.7% and Bank of America was up 4.0%.

Meanwhile, the S&P 500 was down 0.6% as investors fled risk after a new strain of the coronavirus emerged in the United Kingdom, leading several countries to close their borders to Britain just days before the UK is set to leave the European Union.

(Additional reporting by David Henry. Editing by Mark Potter)

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