Hong Kong’s banking regulator said it would relax commercial property mortgage rules, in a move to boost liquidity in a market that has been hit hard by US-China trade tensions, violent street protests last year and the coronavirus crisis.

The change lifts the cap on the loan-to-value ratio for banks providing mortgages for non-residential properties to 50% from 40%, effective from Thursday.

Hong Kong Monetary Authority (HKMA) deputy chief executive Arthur Yuen told a press conference the change was designed to make it easier for the commercial sector to obtain mortgages.

Hong Kong’s commercial property market, the most expensive in the world, saw a drop in transactions in the first half, with prices of offices and retail premises dropping 15% and 10% respectively from the second half of 2019, and the pressure is likely to remain, according to HKMA.

“This will have a big psychological impact on the market,” said Dennis Cheng, senior sales director at Ricacorp (C.I.R.) Properties, of the rule change.

He expects a 20-30% rise in transactions in the next month because investors will not be required to put forward as much cash. However, he did not see a rise in prices, because of low rental yield expectations.

The HKMA tightened rules on mortgage loans several times after the financial crisis in 2009, amid a property price boom.

Alex Leung, a senior director of CHFT Advisory & Appraisal, said the relaxation would enable banks to rearrange loans to avoid the liquidation of some property owners, especially smaller investors.

Meanwhile, Hong Kong Exchanges and Clearing Limited (HKEX) sees a trend of secondary listings by New York-listed Chinese companies bolstering its prospects, as the bourse reported a 1% increase in first-half profit.

E-commerce giant Alibaba completed its secondary listing in Hong Kong last year. Other companies including travel giant Ctrip and Baidu were considering Hong Kong listings, Reuters reported earlier this year.

HKEX hopes to attract more US-listed Chinese firms, making use of a 2018 rule change that eased restrictions on secondary listings, and potentially benefiting from escalating Sino-US political tensions.

“The growing trend of US-listed Chinese companies seeking secondary listings on the exchange has brought, and will continue to bring, diversity and vibrancy to Hong Kong’s capital markets,” HKEX Chairman Laura Cha said in the results filing.

Chinese tech firms Netease and JD.com raised a combined $7.6 billion in secondary listings this summer, more than the other 61 Hong Kong IPOs combined in the first half, according to Refinitiv.

HKEX Chief Executive Charles Li said he was pushing for reforms of the “stock connect” schemes linking Hong Kong with mainland Chinese exchanges to allow investors there to trade in shares of companies such as Alibaba and other Chinese “returnee” companies in Hong Kong.

The scheme currently shuts out mainland investors from certain companies with secondary listings and different governance structures, such as Alibaba.

HKEX’s average daily securities turnover in the first half rose 20% year-on-year, as market volatility boosted trading and clearing fees that make up more than half of the company’s revenue. However, a drop in investment income, due to losses on certain investment schemes, particularly in March, meant first-half net profit was HK$5.23 billion ($673.5 million), compared with HK$5.21 billion a year earlier.

HKEX was fifth among global exchanges ranked by the amount raised by companies in IPOs in the first half, according to Refinitiv data. It was second when including secondary listings.

Average daily volume of lots traded on the HKEX’s subsidiary the London Metal Exchange rose by 1% to 625,000.

Hong Kong shares fell the most in nearly two weeks on Thursday, as hopes of further Chinese stimulus faded and poor corporate earnings and simmering Sino-US tensions weighed on sentiment.

The Hang Seng index closed down 1.5% at 24,791.39, marking its biggest daily per centage fall since Augst 7. The Hang Seng China Enterprises index also fell 1.5%.

China kept its benchmark lending rate for corporate and household loans steady for the fourth month. The country’s premier stressed last week it would not resort to a flood-like stimulus. Mainland shares fell.

Reuters