Reports that Beijing has set an ambitious target to boost the rate of people aged over 80 with one vaccination dose to 90 per cent by late January would tackle a major barrier to reopening, and raised hopes of a quicker path than the market had previously expected.
The financial hub of Shanghai announced on Monday that it would remove virus testing requirements for people to enter most public places from Tuesday.
Also, Beijing no longer requires people who enter supermarkets and commercial buildings to show negative COVID-19 tests on their mobile phones. The announcement followed unprecedented protests against China’s President Xi Jinping’s zero-COVID policy.
Property shift
Meanwhile, it was reported that President Xi said during his conversation with European Union officials during their visit to China that the current omicron variant was less lethal. “This major shift in tone from China’s leader could pave the way for further reopening preparation work,” Citi said.
The broker is also hopeful about the Asian giant’s “clear shift” in policy stance towards the property sector.
“Policymakers appear determined to support debt-trapped property developers. This reduces the downside risk for iron ore.”
Last week authorities ordered the country’s top four state-owned banks to issue offshore loans to help developers repay overseas debt, in the latest support measure for the cash-starved property sector.
China has sought to free up a liquidity squeeze that has stifled the sector, which makes up a quarter of the world’s second-largest economy. Property is a key driver of growth.
Citi said comprehensive measures could improve property completion and therefore “marginally” help demand for steel. It does not expect a turnaround in the short term without a “major” easing in credit conditions.
In fact, Citi’s property team expects 2023 to be no better than 2022, projecting property starts – a lead indicator for steel demand – to fall 40 per cent and real estate investment to fall 10 per cent year-on-year.
As such, iron ore will edge lower to $US100 in June next year before bouncing to $US105 by the end of 2023.