China Real Estate:Policy shock amid unrelenting bullishness brings lower risk appetite

China Real Estate:Policy shock amid unrelenting bullishness brings lower risk appetite。Expectations of policy relaxation wiped out amid a new round of
measurestargeted at controlling housing re-sales. Over the weekend, six
cities came out withanother round of policy controls, which restrict
home re-sales, including Chongqing,Nanchang, Nanning, Changsha, Guiyang,
and Shijiazhuang. Homeowners aregenerally prohibited from re-selling
their homes within 2-5 years after obtaining realestate certificates.
Xi’an and Wuhan also introduced cooling measures on housingASPs and
developers’ sales activities. The new measures are targeted at
furtherenhancing market control to prevent speculation in the housing
market, in our view.

    Timing of the new policies sends a clear message that the government
will keepa tight grip on the housing market. While our view is that the
policy environmentshould remain unchanged, we contend the timing of the
new policies is somewhatsurprising, given the 19th Party Congress is
scheduled for next month. In our view, thisnew round of measures
provides a clear indication that the government will continueto closely
monitor developments in the housing market and that cities with
persistentlystrong home price growth will be under scrutiny. Indeed, NBS
data shows that citiesthat have implemented new policies experienced
rapid housing ASP growth in August,with Changsha and Xi’an registering
y-o-y increase of 16.5% and 13.4%, respectively.

威尼斯人开户 ,    Reiterate our view that risk appetite could decline towards
year-end. Last week,we turned more cautious on China’s property sector
as we argue that investors shouldtake the opportunity to lock in gains
after a record-breaking nine months (see ChinaReal Estate – Caution:
Entering a period of lower risk appetite, 21 September 2017).

    The new measures will likely cool market sentiment and serve to
dampen sky-highgrowth expectations. We reiterate our cautious tone and
advise investors to stayselective. Our preferred names include COLI (688
HK, HKD27.30, Buy) as a qualitylaggard, and Longfor (960 HK, HKD21.65,
Buy) due to its balanced approach betweenscale and profitability.
Fundamentally, a key risk to the sector remains tightenedliquidity,
which could impact developers’ contracted sales momentum.


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