What We Think Of The Chinese Rally
From Morningstar: 2024-10-08 10:18:00
The recent surge in China real estate stocks was driven by policy easing and renewed investor interest, not actual demand. While sales in key cities have increased temporarily, prices are expected to remain weak due to oversupply. It’s predicted that new home sales will stabilize in mid-2025 as excess inventory is absorbed.
Despite the overpricing of some companies like China Jinmao and Vanke, state-owned developers like China Overseas Land & Development and China Resources Land offer valuation upside. These firms are favored due to their higher asset quality and stronger balance sheet.
Recent policy changes, including reduced down payment ratios and relaxed buying restrictions, boosted new home sales in Tier 1 and Tier 2 cities. However, the sustainability of this demand remains uncertain due to low home prices. Lower-tier cities may take longer to recover, and it’s anticipated that China’s home inventory will decrease starting in 2025.
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