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: Tier 1 cities seeing the largest mom decline in proper...
Second-hand property prices in Tier 1 cities fell by 0.8% mom, marking the second largest mom decline since 2011. The sharp property price decline in 3Q14 started a round of strong policy easing in 2014-16. With growing downward pressure on price, we expect that Tier 1 cities will have to take concrete action, which is positive for the sector. Bond prices of some POEs and quasi-SOEs may rebound stronger. Maintain MARKET WEIGHT. CR Land and COLI remain our top picks.
- Damon Shen
- Jieqi Liu
China Property: Fundamentals of property sector further weaken, greate...
According to the latest NBS data, most major indicators of the property industry remained weak in Jul 23, with property sales turning negative in 7M23 (-1.5% yoy). For high frequency data: a) average weekly new home sales of 50 cities in Aug 23 fell 29.5% yoy, and b) average weekly sales of second-hand homes of 10 cities increased 0.6% yoy. The land market sentiment weakened in Wuxi. More defaults may lead to broader price cuts. Detailed supportive policy easing has yet to come. Maintain MARKET ...
- Damon Shen
- Jieqi Liu
China Property: Politburo softens tone on property sector, calling for...
For 50 cities, average weekly new home sales decreased by 30.9% yoy. For the 10 core cities, average weekly sales of second-hand homes dropped slightly by 12.9% yoy and the land market sentiment has diverged between Chengdu and Hangzhou. China’s Politburo on 24 July for the first time admitted the significant change in supply and demand relations, which implies a softer tone. We expect more demand-side policy easing to come. Maintain MARKET WEIGHT. COLI and CR Land remain our top picks.
- Damon Shen
- Jieqi Liu
China Property: State Council approves urban village renovation guidel...
The State Council has approved guidelines on the renovation/redevelopment of urban villages. This is a follow up to the Politburo meeting on 30 April and the policy tone remains prudent rather than aggressive. Weaker-than-expected funding support from the government may be a disappointment. We estimate that under the renovation model, the incremental annual investment for renovating urban villages is equivalent to 3.4-14.1% of national real estate investment and 0.79-3.28% of national fixed asse...
- Damon Shen
- Jieqi Liu
China Property: Greater pressure on property prices will further weigh...
Most major indicators of the property industry deteriorated in Jun 23. Property sales softened further in Jul 23. For 50 cities, average weekly new home sales in Jul 23 declined 32.5% yoy. For the 10 core cities, average weekly sales of second-hand homes decreased slightly by 13.7% yoy. The land market sentiment diverges between Nanjing and Shanghai. Maintain MARKET WEIGHT. COLI and CR Land remain our top picks.
- Damon Shen
- Jieqi Liu
China Property: Latest comments by PBOC official Zou Lan point to furt...
At the press conference of the State Council on 14 July, PBOC senior official Zou Lan publicly admitted the challenges of mortgage early repayment. For the first time, Zou: a) is encouraging banks to reprice interest rates of existing mortgage loans; and b) mentioned that policies introduced when the market was overheated need to be improved/adjusted. These latest statements by the PBOC point to further policy easing. Maintain MARKET WEIGHT. COLI and CR Land remain 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: 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...
- Jieqi Liu
China Property: Subtle change in tone during 20th Party Congress; we c...
New-home sales of 37 cities remained weak in Oct 22, while a few core cities continued to report strong sales data of second-hand homes. Investment sentiment deteriorated further, as seen by the failed auction rate rising to 55% in the third round of auction in Nanchang. Policy framework was largely unchanged during the 20th Party Congress. Supply-side policy will only be relaxed when there is a sharp deterioration of the land market. Maintain MARKET WEIGHT. Prefer pure SOEs. CR Land remains our...
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