China Property:Another Shoe Hits the Floor; Rate Hike Impact Priced-in房地产业

研究机构：花旗环球金融 分析师： Oscar ... 撰写日期：2011年02月08日

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    Necessary rate hike in a liquidity flood — People’s Bank of China (PBoC) hasjust announced another well-anticipated rate hike this evening, right before theChina market opens tomorrow after the CNY holiday. Both deposit and lendingrates will be raised by 4-45bps and 20-25bps respectively. With “expensive price”being the most commonly-heard term during the festival time, we believe this ratehike continues to reflect the government’s necessary moves to tighten ampleliquidity in the market as well as managing the public’s expectations on inflation.
    More burden, but not enough to halt home purchases — Coupled with morestringent terms on mortgage spreads, the effective mortgage rate for homebuyersrises further. The over-5-year base lending rate is lifted 20bps to 6.60%, implying aborrowing cost of 7.26% (6.60% x 1.1x) for a second home buyer now. This isbecoming more meaningful in our view, but not yet powerful enough to alter thepublic’s home purchase decision given the existing inflationary environment andshortage of investment channels. In particular, we expect most homebuyers,especially first-home end-users, have already factored in reasonable rate hikes.
    Based on the 20bps increase for 5-year and above lending rates, it will lead to onlyaround 1.4% and 1.7% increases in monthly mortgage payments for first- andsecond-home buyers with a 20-year tenure.
    Reasonable rate hikes are priced in — In our view, the latest rate hike is a partof the government’s continued tightening in a liquidity boom, rather thanpinpointing the property market. With the new national 8 measures and trial run ofproperty tax unveiled, share prices of PRC property companies have pulled backand we believe the current convincing valuation (i.e. 41% disc. to FY11 NAV and10.0x FY11 PER) factor in most of the impact of these policies, as well as furtherreasonable rate hikes (i.e. Citi estimates another 75bps for the rest of FY11). Thatsaid, if the pace of rate hikes is much faster than expectations, the highermortgage burden may become more significant and trigger our reassessment ofthe overall market impact.
    Stick to mass-market big names; Market consolidation continues — Webelieve property markets rarely peak with early rate hikes, and it is still early toconclude early-stage interest rate hikes will trigger a market collapse. However, avalid conclusion must be that current credit tightening would continue to catalyzemarket consolidation. Mass market developers with robust balance sheets shouldbe least hit, and take the role of beneficiaries amid the tightening. We reaffirm ourview that Oct 2010 to mid-2011 should remain a safe investment period for thesector unless over-aggressive interest rate hikes turn up. Our preferred names arelarge developers like Evergrande, Vanke, Longfor and Shimao.