Table of Content

Bottom-fishing opportunities........................................................... 3
Policy risks priced in; we prefer developers with counter-cyclical growth potential and
exposure to Tier-3/4 cities.........................................................................................................3
More price cuts taking place – a positive beginning...................... 7
More price cuts should reduce the risks of more aggressive tightening ..................................7
Picking winner in a price-cut scenario .......................................................................................9
Looking back at 2008 ................................................................................................................9
Counter-cyclical expansions allow for faster growth................... 11
More opportunities for buying cheap land bank......................................................................11
COLI and Vanke would become even stronger market leaders in 2013 .................................12
Virtuous cycle for financially strong and disciplined developers; vicious cycle for financially
weak and undisciplined developers ........................................................................................12
Entering the high-growth area – Tier-3/4 cities in China ............. 15
We see strong volume growth for Tier-3/4 cities....................................................................15
Tier-3 and Tier-4 cities should be less affected by government tightening.............................16
COGO, Evergrande, Central China Real Estate are pioneers in Tier-3/4 cities.........................18
Government policy summary ......................................................... 20
Property sector policies ..........................................................................................................20
Local residential market.................................................................. 28
Most cities (except for Tianjin) showed good growth in new construction starts in 2010......28