Chinese property resists bailouts

An interesting note from HSBC makes the point that I’ve argued recently that the Chinese property market appears to have passed some critical tipping point in the destruction of speculative psychology. I am expecting a slow recovery at best. L-shaped is the base case.


July sales–a breather, as expected. According to CRIC’s preliminary sales data, our covered companies recorded 32% m-o-m and 42% y-o-y declines on average in July. SOEs generally outperformed, including CR Land (+22% y-o-y),COLI (-18% y-o-y)and Sino-Ocean (-13% y-o-y).CIFI (-23% y-o-y) saw a relatively mild decline while most other POEs disappointed, like Times (-65%y-o-y) and KWG (-85% y-o-y).

We are not surprised about the m-o-m decline in July sales as it is a traditional off-season period and is partly affected by rising COVID-19 cases compared with June. China’s Politburo meeting on 28 July emphasised the stabilisation of the housing market. We expect more details to surface on the real estate fund and potential shanty town redevelopment,which were reported by REDD and FT recently. We maintain our view that more powerful policy stimulus is needed and expect a gradual sales improvement over the next few months.

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