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Real Estate/Property - China
Three key takeaways from Chinese developers’ 1H results
They are as follows: (1) Cash collection rate, though at an acceptable level of 74-
94%, has slowed in general. That, coupled with an increase in land premium
payment, has sent net gearing to a new high of 63%. (2) Contract sales have
been on track for most developers, but that alone won’t likely be good enough. In
this market, we need some upside surprises to drive stocks in our view, and more
importantly, we believe cash inflow is needed to be able to cover the increased
capex. (3) Earnings visibility looks reasonable for the sector with an average 25%
lock-in rate for FY12. We think an earnings CAGR of 30% is still achievable,
though investors’ focus is more likely to be on financial position right now. We
believe the market is likely to reward companies with sound financial position and
the ability to deliver visible growth.
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China Monetary Watch
A new weekly on watching China’s money and FX
We introduce a chart-based weekly monetary watch to cover China’s interbank
liquidity conditions and foreign exchange rates. These issues are surely the focus
of rates and FX investors, but equity markets’ sentiment is increasingly impacted
by interbank rates and exchange rates, and more and more investors rely on
interbank rates /FX to formulate their investment strategies. In this weekly, we will
try to avoid jargons so it could be readable for investors across the board. We
initiate this product with a brief introduction of China’s liquidity conditions, and we
will provide more institutional backgrounds in coming weeks.