• Physical property market sentiment remained weak as weighted average presales of 32 developers we track continued to fall with a 29% y-o-y decline in Dec according to the CRIC database. This dragged the full-year average growth into negative territory. We expect buyer appetites to remain subdued and weak presales performance to extend into Jan as we anticipate adverse newsflow as the sector heads into the 1Q22 repayment peak and a high comparison base.
  • The share prices of China property stocks have on average dropped by another 5.6% in Dec, which marked the fourth consecutive month of decline given volatile investor sentiment in the space. Mid-caps took the largest hit with an 11% decline in the month, followed by large-cap’s 10.5% decrease and small-cap’s 1.2% drop.
  • We believe short-term price volatility is likely to persist in the sector in the near-term as we move into the on- and offshore repayment peak in 1Q22. We recommend investors to watch for entry windows for quality names with a sound balance sheet and abundant saleable resources to underpin pre-sales growth in 2022. Our top picks are COLI (688 HK) and Country Garden (2007 HK).