China’s house price index fell by 3.5% in April. This compares with a 3.4% fall in the previous period.
The April reading shows a slightly faster annual decline than before. The change between the two readings is 0.1 percentage points.
The April house price data confirms the property downturn in China is deepening, not stabilizing. The acceleration from a 3.4% to a 3.5% annual decline suggests that recent government support measures are not yet gaining traction. We view this as a signal to maintain a bearish outlook on assets directly tied to the Chinese economy.
This sustained weakness will likely force the People’s Bank of China into more aggressive monetary easing, putting downward pressure on the yuan. The USD/CNH exchange rate recently broke above 7.45, a key resistance level, and we anticipate this trend will continue. We are therefore looking at buying call options on the U.S. dollar and put options on the Chinese yuan for the coming weeks.
The property slump directly impacts industrial commodity demand, which we can see in recent statistics showing iron ore port inventories rising 5% in the last month alone. This tells us that steel production, a key component of construction, is slowing significantly. Put options on copper futures and short positions on major mining ETFs remain our preferred way to trade this fallout.
Looking at equities, this situation is reminiscent of the failed stimulus packages we saw throughout 2025 which led to sharp sell-offs. We expect Chinese developer stocks and the banks that lend to them to underperform the broader market. We will be adding to put positions on the Hang Seng Mainland Properties Index.
The ripple effects are now clearly visible beyond China, with the Australian dollar, a key proxy for Chinese economic health, down 2% this past month. Global companies with heavy sales exposure to China, particularly in the luxury and automotive sectors, will face significant headwinds. We see this as an opportunity to hedge by shorting relevant European and U.S. sector ETFs.
