20180626-广发证券_香港_-China_Pulse_Check__Property_Sector_7页_846kb

China Pulse Check: Property Sector Summary

Core Content

This report provides an analysis of the Chinese property sector as of May 2018, covering policy updates, transaction data, land market trends, liquidity conditions, and investment recommendations. It also outlines key risks and disclosures related to the research.

Main Views

Property Transactions

• Major cities are expected to see an acceleration in property transactions.
• First-tier and third-tier cities showed positive YoY growth in property sales, reversing previous declines.
• Second-tier cities experienced a decline of 3.4% YoY, though the rate of decline improved compared to April.
• New commercial property projects launched in 26 cities increased by 19% MoM and 13.1% YoY, indicating increased developer activity.
• Supply-side adjustments may be possible due to price restrictions, with further improvement expected in the second half of 2018.
• Inventory depletion is high, which is likely to drive a rebound in sales growth.

Land Market

• Land supply and demand continued to grow in May 2018.
• Total land transaction value reached Rmb332.4bn, up 17% MoM and 76% YoY.
• Average premium for land parcels was 31%, indicating strong demand.
• Performance varied by city tier:
  • First-tier cities saw declines in land supply and demand YoY.
  • Second-tier cities had significant growth from a low base.
  • Third-tier cities experienced dramatic growth, pushing land transaction values higher.

Liquidity

• Mortgage rates grew by 5.60% in May, but YoY growth narrowed for the first time.
• Mortgage rates have bottomed out at 116bp, with limited future growth expected.
• Financing conditions are easing, which may gradually reduce the depressing effect on demand.
• P/E valuation is expected to rise further due to improved fundamentals and easing financing pressure.
• Leading developers are likely to benefit from improved financing channels and lower costs, leading to increased market share.
• Investment recommendations include:
  • First-tier leaders: China Merchants Shekou Industrial Zone (001979 CH), Vanke (000002 CH), China Fortune Land Development (600340 CH), Future Land (601155 CH).
  • Second-tier leaders: Zhongnan Construction Group (000961 CH), RiseSun Real Estate Development (002146 CH), Yango Group (000671 CH), Guangyu Development (000537 CH), Languang Development (600466 CH).
  • Sub-sector names to watch: Everbright Jiabao (600622 CH), China World Trade Center (600007 CH).

Key Information

Policy Updates

• The property control policy was reaffirmed by the Ministry of Housing and Urban-Rural Development.
• Purchase and sales restrictions were reintroduced in several cities, including Taiyuan, Harbin, Guiyang, and Xuzhou.
• The policy on skilled workers was extended, and residential settlement policies were introduced in Yichun, Mudanjiang, Changzhi, and Dazhou.
• Provident fund policies were adjusted locally, with marginal changes to maximum mortgage loans, down-payment ratios, and deposit durations.

Risks

• Further policy tightening could impact market activity.
• Continued rise in mortgage rates may still affect demand.

Figures and Data

• Figure 1: Overview of central government key policies in May 2018.
• Figure 2: Overview of local government key policies in May 2018.
• Figure 3: Property area sold YoY growth in 40 key cities (with and without HPRs).
• Figure 4: Residential property inventory and inventory depletion cycle in 32 cities.
• Figure 5: Property transaction data across various regions and cities.
• Figure 6: Changes in first-home mortgage rates at 533 banks.
• Figure 7: Average second-home mortgage rates in 35 key cities.
• Figure 8: Corporate bond and overseas bond issuance costs for listed property developers.

Rating Definitions

• Buy: Stock expected to outperform benchmark by more than 15%.
• Accumulate: Stock expected to outperform benchmark by more than 5% but not more than 15%.
• Hold: Expected stock relative performance ranges between -5% and 5%.
• Underperform: Stock expected to underperform benchmark by more than 5%.
• Sector ratings:
  • Positive: Sector expected to outperform benchmark by more than 10%.
  • Neutral: Expected sector relative performance ranges between -10% and 10%.
  • Cautious: Sector expected to underperform benchmark by more than 10%.

Analyst Certification

• The research analyst(s) certifies that the views expressed accurately reflect personal opinions.
• No remuneration was directly or indirectly linked to specific recommendations.

Disclosure of Interests

• GF Securities (Hong Kong) does not hold any securities mentioned in the report.
• No investment banking relationships with the companies mentioned in the past 12 months.
• Analysts are not officers of the companies and have no financial interests in the securities.

Disclaimer

• This report is for informational purposes only and does not constitute an offer to buy or sell securities.
• No liability is accepted for losses arising from the use of the materials.
• Investments involve risks, and past performance does not guarantee future results.
• Recommendations are not tailored to individual investment objectives or financial situations.

Copyright

• This report is copyrighted by GF Securities (Hong Kong) Brokerage Limited.
• No part of the materials may be copied, reproduced, or re-disseminated without prior written consent.