The property market remained active in June: Sales in the seven
major cities we track were down 2% M/M in June but up 130% Y/Y.
However, as we enter the summer low season, we expect sales to
gradually ease by 10-15% in 3Q09. We believe April/May sales volume
marked the peak for the cities we track. So far in the first two weeks of
July, sales are holding up well, on average easing only 4% M/M.
• No nationwide tightening policies expected: We do not think mortgage
restrictions on second homes in Hangzhou are a prelude to a widespread
tightening in the property sector nationwide. Rather, we think they
reflect normal adjustments by banks themselves to control loan growth.
Given the importance of the housing sector in the recovery of domestic
demand, the central government is unlikely to come out with widespread
tightening policies to suppress property demand, in our view.
• Correction provides opportunity to accumulate mid/small-cap
stocks: After three straight months of strong share price rally, a
correction was triggered by renewed fears of tightening policies, in our
view. However, we believe the recovery of the property market is
sustainable and the strong fundamentals remain intact. We still prefer
mid/small caps such as Sino Ocean (3377.HK, OW), Shui On Land
(272.HK, OW), and KWG (1813.HK, OW), as their valuations still look
cheap relative to large caps such as COLI and CR Land. The narrowing
of the valuation gap is likely to continue, in our view. The next catalyst
could come from earnings upgrades following strong contracted sales
achieved YTD and NAV-accretive land acquisitions.

Table of contents
China market review.................................................................3
Share price performance ..............................................................................................3
Our key calls ................................................................................................................4
Investment views .......................................................................................................10
Major corporate actions.........................................................15
Land acquisition.........................................................................................................15
National macro and industry movements ............................17
Shanghai and Hangzhou........................................................20
Shanghai ....................................................................................................................21
Hangzhou...................................................................................................................22
Beijing .....................................................................................24
Guangzhou..............................................................................28
Shenzhen ................................................................................31
Chongqing and Chengdu.......................................................34