新鸿基China Property Sector [36 pages,
Tightening Unlikely to Ease Soon
􀂄 There are currently rumors in the market that the central government might
ease its tightening measures on the property sector. We see little possibility of
substantial policy changes, and recommend investors focus on developers with
strong fundamentals to ride out the current poor market sentiment. These
include solid finances and nationwide diversification, which have proven
effective in bringing in strong 1H08 presales and limiting the impact from
tightening measures, e.g. COLI (688.HK, HK$12.86, Buy).
Long-term fundamentals remain unchanged
􀂄 The current expectations that there might be an easing of tightening measures
for real estate comes after a significant drop in property stocks. However, we
don’t expect any easing in the short term, as we see 1) fundamental demand for
property remains unchanged, with supply still lagging demand in most cities,
and 2) ASPs are still on an uptrend even though growth has slowed.
􀂄 Nonetheless, the nationwide tightening measures have caused many end users
to adopt a ‘wait and see’ attitude, and property-transaction volumes to slow
from the boom times of 2006-07.
