China Property Monthly Chart Book – How effective is the recent policy easing?
Homebuyers increasingly less responsive to supply-side policy easing. Transaction boost led by the policy easing in Beijing and Shanghai (including down-payment ratio and mortgage rate cuts in non-core districts) in mid Dec-23 has been mediocre and short-lived. Only a mild initial pick-up in transaction volume was seen in the first two weeks (more evidently in the secondary market), but then the said policy impact in both cities started to fade. This coincided with our findings during our Xiamen site visit (see link for details), where we found that homebuyers have become increasingly less responsive to supply-side policy easing. While we expect more relaxations en route with core districts likely to follow, these measures alone will likely be insufficient to reignite the physical market. Homebuyer sentiment is expected to remain on the conservative side until concrete improvements are seen in the income outlook and home price expectations.
Market to trade sideways until meaningful stimulus is introduced. Investor sentiment may remain subdued with trades primarily short term-oriented until meaningful policy changes occur. The share price volatility is likely to persist due to relatively thin trading volume and policy-related noise. KE Holdings (2423 HK/BEKE US) is our top pick, as it is poised to capitalise on developers’ rising reliance on external customer acquisition channels and surging secondary market transactions. Value-hunting opportunities may also emerge on quality SOE names amid the share price volatility.