Physical market heading to desired status; do not expect policy relaxation
Our recent site visits revealed that: 1) high-end projects encountered slow sales,
but well-designed smaller units with reasonable prices are better received; 2) for
third-home buyers, local banks require 60% downpayment and 1.2x of PBoC
lending rate; 3) local government had not ramped up building affordable housing.
In addition, Shanghai CBRC had recently required local banks to only lend against
WIP.
􀂄 Remain cautious on residential segment, prefer commercial developers
Recent sector rally on policy relaxation assumption would not sustain. We remain
cautious and prefer Renhe and SOHO. We also like Sino-Ocean and Country
Garden for their strong financials and relative attractive valuation.