REAL ESTATE ADJUSTMENT TO CONTINUE?

China will work unwaveringly to bring housing prices to "reasonable levels" so as to ensure fairness and stability, Premier Wen Jiabao said, ruling out loosening the government's control over the real estate sector.

Meanwhile, China Banking Regulatory Commission, the country's banking industry regulator, announced last Monday that China will work to defuse local government debt risks and contain loan risks in the real estate sector.

After PBOC announced reserve reduction for the first time this year, some market analysts believe that part of the released liquidity will likely flow to the housing market and will help ease the ongoing funding shortage that has hit many developers.

Nevertheless, the central bank's move might not mean the government's intention of relaxing its monetary policy on the housing market.

A further price correction is ahead, analysts said.

First-tier cities like Beijing will see further price falls in 2012, with average decreases ranging from 10 to 15 percent, said Fan Xiaochong, vice president of the Sunshine 100 Real Estate Group.

"For developers who run short of capital, they should cut their prices as soon as possible. A wave of price cuts occurred in a batch of firms between last October and November. There will soon be a second round," said Yang Hongxu, a senior analyst with the Shanghai-based E-house China Research Development Institute.

And for many potential homebuyers, the key problem is not the relaxing credit policy, but their under-capacity to buy still unaffordable homes.

The possible way of drawing those potential homebuyers into the market is to decline home prices to a reasonable level, which will really help the bleak property market get out of a dilemma.

ROSIER OUTLOOK FOR EQUITY MARKET?

Chinese shares have risen for fifth straight day last week.

Stocks on the Chinese mainland may fall as much as 13 percent by the end of the year as the central bank's "fine-tuning" of monetary policies won't be enough to offset an economic slowdown, according to Bank of America Corp.

The main reason most private shareholders suffered serious losses over the past two years was immature governance of the capital market and a weak regulatory system, according to the China Securities Regulatory Commission (CSRC) in a statement released on last Thursday.

"The regulatory agency is formulating policies to curb speculative investments, especially for IPOs and inferior stocks that drive share prices to irrational highs," the statement said.

According to China Daily, the CSRC plans to establish an independent agency to evaluate the operating systems of public companies, assess investor risks and protect their interests.

The government needs to cut interest rates or relax curbs in the property market to sustain this year's rebound for the Shanghai Composite, David Cui, chief China strategist at the Merrill Lynch unit, said in an interview on Wednesday. Cui, who has been bearish on China equities since May 2010, said the Shanghai gauge may drop to 2,100 by year-end.

"If the government only does fine tuning, it's not sufficient to remove the major overhangs behind the poor market performance over the past two years or so, including a lack of a new and sustainable growth driver and the banking system's bad debts," said Cui. "The markets will likely remain lukewarm."