over 1 year ago • 3 mins
The Chinese central bank cut a key interest rate on Monday in a bid to reinvigorate the country’s property sector.
What does this mean?
Ever since the Chinese government cracked down on its property sector last year (remember Evergrande?), the country’s developers have been struggling to make ends meet. That’s brought construction projects to a halt, as well as caused homebuyers who paid in advance for a yet-to-be-built property to boycott their mortgage payments. And since the real estate sector accounts for roughly a third of the country’s output, it’s only making the country’s economic slowdown worse.
So in hopes of turning things around, the country’s central bank slashed its 5-year mortgage rate by the equal-most on record on Monday. That’ll reduce borrowing costs on new mortgages across the country, which the government is hoping will lift demand and boost the languishing sector.
Why should I care?
For markets: Priority number one.
Some analysts don’t think this rate cut – or even a second one, which they’re expecting later this year – will do enough to address the crisis. After all, a big part of the issue is that homes are sitting half-finished, so nothing’s likely to change until the stalled projects get over the line. The Chinese government, then, has announced that it’ll offer special loans to help with just that, which might be why the Hang Seng Mainland Properties index rose on Monday.
The bigger picture: China saves for a rainy day.
It's not just mortgage strikes that are a problem, with more and more households in the country now opting to avoid taking on debt altogether. Households amassed 10.3 trillion yuan in bank deposits in the first half of 2022 – a 13% increase from the same time last year and the biggest jump on record. That means consumers are spending less now and saving more for tomorrow, which could weigh on economic growth for some time to come.
Keep reading for our next story...
Signify Health’s stock jumped 40% on Monday as a host of buyers think about buying the home-health provider.
What does this mean?
Reports emerged at the start of the month that drugstore giant CVS was interested in buying Signify, which provided in-home healthcare evaluations to around 2 million patients last year. And now it turns out that a handful of other hopefuls have entered the fray, including insurer UnitedHealth, fellow healthcare provider Option Care, and – fresh off its deal to buy One Medical last month – Amazon. There’s no guarantee that an acquisition will go ahead, but the speculation alone is already going down well with investors: UnitedHealth’s reported bid of over $30 a share is almost twice what the company was trading at just a month ago.
Why should I care?
For markets: This won’t be straightforward.
The push for Signify shows how keen companies are to expand into the healthcare industry, which makes sense given that it’s something Americans avoid cutting back on even in a downturn. But a deal in the sector is also bound to catch the attention of regulators, which will be wary that reduced competition could work against consumers. That’s nothing new for the two frontrunners in this particular deal, mind you: UnitedHealth is already fighting to buy Change Healthcare amid concerns that it’ll gain access to sensitive information, while Amazon’s regulatory battles are too many to count.
Zooming out: Amazon goes off.
Speaking of Amazon, the ecommerce giant is thinking twice about its physical stores in the UK. It’s opened 18 checkout-free Amazon Fresh stores across the country, and had plans to open hundreds more. But with the tough economic backdrop having led to disappointing sales, it’s reportedly considering quitting while it’s ahead.
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