FXStreet (Delhi) – Prakash Sakpal, Economist at ING, suggests that our baseline scenario is that housing starts grow in 2016 but that real estate remains the weakest component of fixed asset investment.
Key Quotes
“The 70-cities new home price data for October are due tomorrow at 9.30am local time. The trend has been rising number of cities reporting sequential home price increase, which we think persisted despite slowdown in home sales growth in October. As of September, 39 cities reported sequential increase in prices, up from zero a year ago, and 21 cities reported decrease in prices, down from 69 a year ago.”
“Data last week showed that home sales measured in floor space sold grew by 5.9% YoY in October, down from 8.8% in September. Housing starts, proxied by residential construction work started measured in floor space, fell by 24.5% YoY in October, the biggest negative this year, but -14.7% YoY YTD growth was little changed from 2014’s – 14.4%.”
“We remain of the view that prospects for a growth turnaround depend on housing. Policy is positive for housing and our baseline scenario is that housing starts grow in 2016 but that real estate remains the weakest component of fixed asset investment.”
“The PBOC continued to push USDCNY fixing rate higher for the 10th consecutive trading day yesterday, the longest stretch of weaker CNY fixing since 2008. Spot USDCNY followed fixing higher in six out of 10 days. The PBOC’s latest easing, a 25bp policy rate cut and 50bp RRR cut on October 23, has halted the re-convergence of onshore and offshore forward curves from the wedge opened after the 811 devaluation. Re-convergence will require more exchange market operations. Our yearend USDCNY forecast is 6.35 (latest 6.37, Bloomberg median 6.40, NDF 6.41).”
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