reports
- Damon Shen
- Jieqi Liu
China And Hong Kong Property Strategy: Channel checks and observations...
In Shanghai, the new home market shrank further with divergence among regions; the secondary market saw volume rebound with a weak ASP performance. In Hong Kong, sales performance is still divergent among developers despite new home transactions growing by nearly 15x mom in Mar 23, reflecting a mild recovery of market sentiment. Maintain MARKET WEIGHT. Top picks: CR Land, COLI, SHKP and LINK REIT.
00016 SUN HUNG KAI PROPERTIES LIMITED
00823 LINK REAL ESTATE INVESTMENT TRUST
01109 CHINA RESOURCES LAND LIMITED
SCNR SUNAC CHINA HOLDINGS LTD.
RLF LONGFOR GROUP HOLDINGS LTD.
00884 CIFI HOLDINGS (GROUP) CO. LTD.
00014 HYSAN DEVELOPMENT CO. LTD.
01997 WHARF REAL ESTATE INVESTMENT CO. LTD.
1238 POWERLONG REAL ESTATE HOLDINGS LTD
00017 NEW WORLD DEVELOPMENT CO. LTD.
- Damon Shen
- Jieqi Liu
China And Hong Kong Property Strategy: Monitoring the recovery of seco...
New-home sales in 50 core mainland cities weakened further in the second week of March. Second-hand home sales in Beijing/Shanghai/Guangzhou/Shenzhen are picking up while transaction volume was still lower yoy in Jan-Feb 24. Hong Kong property sales volume continues to surge. However, home buyers are still very picky and sensitive to pricing. Maintain MARKET WEIGHT on the China and Hong Kong property sector. Expect attitudes toward POE and quasi-SOE developers to improve in the near term.
00823 LINK REAL ESTATE INVESTMENT TRUST
01109 CHINA RESOURCES LAND LIMITED
SCNR SUNAC CHINA HOLDINGS LTD.
RLF LONGFOR GROUP HOLDINGS LTD.
00884 CIFI HOLDINGS (GROUP) CO. LTD.
00014 HYSAN DEVELOPMENT CO. LTD.
01997 WHARF REAL ESTATE INVESTMENT CO. LTD.
1238 POWERLONG REAL ESTATE HOLDINGS LTD
00017 NEW WORLD DEVELOPMENT CO. LTD.
86 SUN HUNG KAI & CO LTD
- Damon Shen
- Jieqi Liu
China and Hong Kong Property Strategy: Divergence of policies and prop...
The 2024 NPC meeting gave little evidence of strong policy support to the property sector. New-home sales in 50 core mainland cities remain weak. Second-hand home sales in Beijing/Shanghai/Guangzhou/Shenzhen are picking up. Hong Kong saw a very strong rebound in new-home sales after the 2024 Budget Speech. Maintain MARKET WEIGHT on the China and Hong Kong property sector. Expect a continuous sales recovery to drive the re-rating of Hong Kong developers.
00016 SUN HUNG KAI PROPERTIES LIMITED
00823 LINK REAL ESTATE INVESTMENT TRUST
01109 CHINA RESOURCES LAND LIMITED
SCNR SUNAC CHINA HOLDINGS LTD.
RLF LONGFOR GROUP HOLDINGS LTD.
00884 CIFI HOLDINGS (GROUP) CO. LTD.
00014 HYSAN DEVELOPMENT CO. LTD.
01997 WHARF REAL ESTATE INVESTMENT CO. LTD.
1238 POWERLONG REAL ESTATE HOLDINGS LTD
00017 NEW WORLD DEVELOPMENT CO. LTD.
- Damon Shen
- Jieqi Liu
China Property: A closer look at China’s property market: Takeaways fr...
To better understand the market, we visited 11 property projects in Shenzhen, Guangzhou, Shanghai and Suzhou on 17 and 19 February. Developers were offering 0- 10% discounts on registration prices, while commission rebates varied among cities. Margins are acceptable in SH/SZ/GZ. Competition spurs product upgrades. Maintain MARKET WEIGHT. Expect leading developers to balance scale and profitability.
- Damon Shen
- Jieqi Liu
China Property: Tier 1 cities stepping up on easing HPRs; preview of 2...
The effect of easing mortgage policies in Beijing and Shanghai in Dec 23 is disappointing. New-home sales in 50 cities contracted further in Jan 24. With property prices in core cities yet to bottom out, we expect more cities to remove HPRs, following Guangzhou. Maintain MARKET WEIGHT and prefer SOEs to POEs. We also fine-tune our earnings forecasts for CR Land and COLI, and maintain BUY on both.
- Damon Shen
- Jieqi Liu
China Property: Property industry taking a step towards new developmen...
The PBOC has published guidelines to boost financing of rental housing. A clear preference towards “asset-heavy” operators with higher LTV ratios may encourage more group purchases of new home stocks and expand funding sources of developers. We also have an overview of the 2023 preliminary operational data of CR Land, COLI, and Longfor. Maintain MARKET WEIGHT. Trim earnings estimates for COLI and Longfor. CR Land remains our top pick.
- Damon Shen
- Jieqi Liu
China Property: Growing downward pressure on new home prices; restart ...
The new home market remained weak with even major SOEs seeing contracted sales plunge yoy in Dec 23, pointing to growing downward pressure on ASP. The effect of the latest policy easing in Shanghai was also disappointing. Meanwhile, the second-hand home market saw better momentum thanks to flexible pricing. Three policy banks restarted the PSL programme in Dec 23, which is a positive move. Maintain MARKET WEIGHT. CR Land and Longfor are our top picks.
- Damon Shen
- Jieqi Liu
China Property: Takeaways from Singapore/Kuala Lumpur marketing trip.
Our key takeaways from our marketing trip to Singapore and Kuala Lumpur on 5-9 Jun 23 are: a) key investors are concerned about the deterioration of buyers’ expectations (we think the new equilibrium might be healthier); b) policy is key, with higher volatility narrowing the trading range; and c) investors mainly look at SOEs but worry about potential placement. We think the current valuation is still attractive and implies low placement risks. Maintain MARKET WEIGHT. CR Land and COLI remain our...
- Damon Shen
- Jieqi Liu
China Property: Market fundamentals not weak enough to trigger policy ...
Property sales further softened in May 23. For 66 cities, average weekly new home sales of May 23 were 16.4% lower than that of Apr 23. For the 10 core cities, average weekly sales of second-hand homes decreased 22.6% mom. POEs’ financing channel was tightened again, triggered by the potential failure of Zhuhai Wanda CM’s IPO. We expect industry policies to remain status quo in the near term. Maintain MARKET WEIGHT. CR Land and COLI remain our top picks. Downgrade Powerlong to HOLD.
- Damon Shen
- Jieqi Liu
China Property: Imbalanced recovery of property industry in March; exp...
Mar 23 NBS data showed strong new-home sales and property completion, while investment and housing starts remained weak. Government revenue from land sales dropped further by 27% yoy, with sharper divergence of investment enthusiasm among locations. We think the property industry’s recovery in 1Q23 was weak and imbalanced. We expect more policies to revive investment, thus there is a higher possibility of further re-rating of POEs. Maintain MARKET WEIGHT. COLI remains our top pick.
- Damon Shen
- Jieqi Liu
China Property And Property Management Strategy: Results wrap-up for 2...
In 2022, the profitability of developers and privately-owned property management (PM) companies deteriorated as expected, while the higher dividend payout ratios of SOE PM companies came as a positive surprise. With pressure from CPI inflation falling, we expect more room for policy easing. Besides, SOEs and PM companies may regain growth momentum in 2023 due to the economic recovery. Maintain MARKET WEIGHT on the property sector and OVERWEIGHT on the property management sector.
01109 CHINA RESOURCES LAND LIMITED
00884 CIFI HOLDINGS (GROUP) CO. LTD.
02669 CHINA OVERSEAS PROPERTY HOLDINGS LIMITED
1238 POWERLONG REAL ESTATE HOLDINGS LTD
6098 COUNTRY GARDEN SERVICES
6049 POLY PROPERTY SERVICES CO LTD
1209 CHINA RESOURCES MIXC LIFESTYLE SERVICES
1995 CIFI EVER SUNSHINE SERVICES GROUP LTD
- Damon Shen
- Jieqi Liu
China Property: A major breakthrough: China’s REIT programme expanded ...
In the latest NDRC/CSRC circular, shopping space is included in China’s REIT pilot programme. As shopping space is among the most sizeable segment of investment properties with more than Rmb10t of estimated property value in core tier 1/2 cities, this marks a major breakthrough and signals the marginal softening of government tone on the property sector. However, we expect only developers with strong portfolios and investment property brands to benefit. Maintain MARKET WEIGHT.
- Damon Shen
- Jieqi Liu
China Property - Takeaways from trip to Shenzhen/Guangzhou/Suzhou.
New home sales saw a wow decrease for two consecutive weeks, with strong sentiment in the second-hand home market. From our recent trip to China, we observed: a) divergent sentiments of first home buyers vs upgraders, b) the risk of undelivered homes being gradually mitigated, and c) the sluggish development pace of LGFVs. We slightly revise up our forecast of new home sales to reflect better-than-expected sales in Jan-Feb 23. Maintain MARKET WEIGHT. BUY COLI and HOLD CIFI.
- Damon Shen
- Jieqi Liu
China Property: Sustainability of sales recovery remains to be seen; e...
The new-home and second-hand home markets saw a sales recovery in the two weeks after Chinese New Year. However, one key reason is that pent-up demand was unleashed in Feb 23. The sustainability of this sales recovery remains to be seen. On the supply side, we expect to see more equity financing plans by SOE developers, which will weigh on sector valuation. Maintain MARKET WEIGHT. Expect medium-sized SOEs to continue outperforming in 2023. Buy COLI for its attractive valuation.
- Damon Shen
- Jieqi Liu
China Property: Limited upside from policy in the near term; weak dema...
Dec 22 NBS data showed signs of improvement. The second hand home market is showing a stronger momentum than the new home market. Dalian Wanda re-tapped the US$ bond market, and we expect developers with stronger recurring income and alternative funding source to have access to the offshore market. In the short term, the central government is expected to offer little surprise on the policy front. Policy execution and the contracting new home market remain the key challenges. Maintain MARKET WEIG...
- Damon Shen
- Jieqi Liu
China Property: Banks’ support extended to developers at risk; re-rati...
More financial institutions are joining the club of developers' white knights, and credit support has been extended to developers who have recorded debt extension/default. Hence, we expect confidence in POEs to be further strengthened and debt restructuring/extension will accelerate, which may lead to a further re-rating of POE PM companies for a clearer development landscape. However, a faster-than-expected relaxation of China’s Zero-COVID policy may weigh on home sales in the short term. Maint...
- Damon Shen
- Jieqi Liu
China Property: CSRC resumes equity financing for developers; property...
After suspending equity financing for developers for six years, CSRC announced that it will resume all major equity financing tools for developers on the A-share market. This marks a key inflection point as it will ease the liquidity pressure on developers and hints at a change of the property sector’s political positioning. SOEs will be key beneficiaries. Note that both the sales and land markets remained weak. Further policy easing is needed. Maintain MARKET WEIGHT. Maintain BUY on CR Land and...
- Ariel Poh Yun Li
- Jieqi Liu
China Property: Home delivery remains a major risk; residential REITs ...
In 7M22, contracted sales of the top 100 developers dropped 49% yoy, while SOE developers saw notable improvements in yoy growth in Jun 22 and Jul 22. Recent policy signals are mixed, with the good news being the Politburo’s softened tones on demand-side policy and the approval of China’s first residential REITs. However, there is still a lack of clear guidance on the home delivery issue. Maintain MARKET WEIGHT. We lower our earnings forecast and target price for CR Land to factor in rent relief...
- Ariel Poh Yun Li
- Jieqi Liu
China Property: Weakened demand with further divergence among cities; ...
For the first three weeks of Jul 22, average weekly new-home sales volume of Tier 1/Tier 2/Tier 3 cities that have data available is 4% higher /30% lower/37% lower than average weekly sales of Jun 22. A market expert from CREIS points to weakened overall demand with further divergence among cities. A clearer and feasible rescue plan is needed to stabilise the market, and we think the possibility is rising. Maintain MARKET WEIGHT on the property sector.
- Carolyn Ching
- Jieqi Liu
- Sabrina Soh
China Strategy: Rising downside risk for property; manageable NPL risk...
Buyers of over 150 property projects have collectively refused to make mortgage payments for unfinished, pre-sold units unless construction resumes. We estimate aggregate GFA of projects with serious delayed delivery at 147m-205m sqm. While we expect the unfolding boycott to likely negatively impact buyers’ sentiment and further tighten developers’ financing, the impact on China banks remains manageable and should alleviate market concerns. Maintain MARKET WEIGHT on both sectors.
0939 CHINA CONSTRUCTION BANK CORPORATION CLASS H
01109 CHINA RESOURCES LAND LIMITED
SCNR SUNAC CHINA HOLDINGS LTD.
00884 CIFI HOLDINGS (GROUP) CO. LTD.
600036 CHINA MERCHANTS BANK CO. LTD. CLASS A
601939 CHINA CONSTRUCTION BANK CORPORATION CLASS A
M4B CHINA MERCHANTS BANK CO. LTD. CLASS H
1238 POWERLONG REAL ESTATE HOLDINGS LTD
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