China Property Monthly Chart Book: Who can benefit most from a step up in policy relaxation?
Along with the policy relaxations in Suzhou and Guangzhou (see comment), REDD reported that President Xi voiced his support for the relaxation of home-purchase restrictions in Tier 2 cities. If this is confirmed and restrictions are to be swiftly relaxed, healthy developers with higher exposure to Tier 2 cities like COLI (688 HK), Longfor (960 HK), and Jinmao (817 HK) would stand to benefit from a potential pick-up in demand. Developers with tight liquidity like Ronshine (3301 HK) and Yuzhou (1628 HK) that have more projects located in Tier 2 cities may also witness a possible acceleration in asset disposals as interest for M&A of their projects could potentially increase.
The property sector’s share prices fell by 6.8% on average in Aug and underperformed the HSI’s 1.0% drop. Mid-caps took the hardest hit with a 10.8% decline, followed by small caps and large caps at 6.0% and 3.3%, respectively.
Investor confidence remains fragile and more concrete progress and follow through on policy support will be required for a sustainable round of recovery. Our top picks, which would ride on the implementation of effective support measures and physical market recovery to come, remain the same: COLI (688 HK), CR Land (1109 HK), and Yuexiu (123 HK). We also like Beike (BEKE US/2423 HK) for being a direct beneficiary of the homebuyer shift to the secondary property market.
