Industry Overview * **Healthy Peak Season**: Production of cement, glass, and coal increased during the peak season, while steel production declined. [doc id='1'] * **Property Market**: New property starts decreased by 20.6% YoY in September, GFA sold declined by 11.2% YoY, and property completions fell by 31.5% YoY. However, client visits and property sales in multiple cities saw YoY increases during the National Day Holiday. [doc id='1'] * **Fixed Asset Investment (FAI)**: FAI increased slightly to +3.4% YoY in September, with highway investment up 0.1% YoY and railways growing 23.9% YoY. [doc id='2'] * **Steel Production**: Crude steel output decreased by 1.1% MoM and -6.1% YoY in September, but domestic steel apparent consumption declined by 5.6% YoY and improved by 0.8% MoM. [doc id='2'] * **Cement Production**: Cement production increased by 6.9% MoM and -10.3% YoY in September, with shipments recovering due to better demand in the peak construction season. [doc id='2'] * **Aluminum Production**: Aluminum production increased by 1.2% YoY in September but decreased by 2.1% MoM. Higher production was driven by capacity resumption in Sichuan and Guizhou. [doc id='3'] * **Coal Production**: Coal production increased by 4.5% MoM to 414mt in September and grew by 4.4% YoY. [doc id='4'] * **Glass Production**: Glass production increased by 8.5% YoY and 4.3% MoM in September, but overall glass supply remained high, and demand stayed muted. [doc id='5'] Key Takeaways * **Construction Sector**: The construction sector saw a rebound in demand, leading to increased production of cement, glass, and coal. However, steel production decreased, possibly due to lower demand from the construction sector. [doc id='1', '2', '4', '5'] * **Property Market**: The property market remains weak, with new starts and completions decreasing. However, there are signs of improvement in client visits and property sales. [doc id='1'] * **Infrastructure Investment**: Infrastructure investment, particularly in railways, is growing, which could support economic growth. [doc id='2'] * **Aluminum Production**: Aluminum production is expected to continue increasing, driven by capacity resumption in Sichuan and Guizhou. [doc id='3'] * **Coal Production**: Coal production is increasing, which could support energy security and economic growth. [doc id='4'] * **Glass Production**: Glass production is increasing, but demand remains weak, leading to downward pressure on prices and margins. [doc id='5']

M Update China Financials | Asia Pacific October 18, 2024 07:36 AM GMT PBOC launches swap facility to support equity market The initial feedback of the Rmb500bn facility looks better than expected - Rmb200bn applied by 20 brokers and fund management firms. While it supports sentiment, we expect brokers to be generally prudent in deploying the funds in the stock market. PBOC on 18 Oct officially launched the Rmb500bn swap facility with nonbank institutions. Some details: • tenor will be 1 year and can be ext ...

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Summary of China Property Sector Conference Call Industry Overview - The conference focused on the **China Property** sector, discussing recent policy changes and market dynamics. Key Policies Announced 1. **Special Local Government Bonds (LGBs) for Idle Land**: - Local governments can raise special LGBs to purchase idle land, defined as land not developed after two years or construction halted for over a year with minimal progress. - Estimated idle land in China is approximately **4.9 billion sqm GFA**, with an additional **1 billion sqm GFA** potentially qualifying for repurchase. - The total cost to buy back all idle land could reach **~Rmb20 trillion**, but local governments are expected to be selective in purchases due to market demand concerns [2][5][6]. 2. **Support for Unsold Homes**: - The government will allow the use of special LGBs and affordable housing subsidy funds to purchase unsold homes, enhancing local governments' financial incentives to buy these properties. - Current financial returns on unsold homes are unattractive (~2% rental yield vs. 2.9% funding cost), but special LGBs could lower funding costs to **2.2-2.3%** [5][6]. 3. **Tax Rate Optimization**: - A new policy aims to eliminate the distinction between ordinary and non-ordinary housing for VAT and land appreciation tax (LAT), potentially lowering transaction costs and encouraging market turnover. - This change is expected to support developers by reducing tax burdens on higher-margin projects [6][7]. Market Dynamics and Sales Performance - **Golden Week Sales**: - Strong growth in primary sales in tier-1 cities, with daily averages increasing by **50% to 275%** compared to 3Q24. - Secondary market sales also saw growth of **12-138%**. The increase is attributed to aggressive discounts for first-home buyers [7][11]. - **Price Trends**: - Recent price hikes are viewed as marketing tactics rather than genuine market recovery, with developers remaining conservative in pricing strategies. - Home price stabilization is anticipated to take time, potentially aligning with rental yields and mortgage rates [8][11][17]. - **Future Demand-Side Easing**: - More demand-side easing measures are expected in January 2025 if home price corrections worsen. This may include the removal of home purchase restrictions in tier-1 cities and the establishment of a stabilization fund [8][9][18]. Long-term Outlook - Projected sales volume for 2024 is around **900 million sqm GFA**, with a normalized long-term level estimated at **700-800 million sqm GFA**. - The market is expected to stabilize as confidence in income, employment, and home prices improves [9][22]. Investment Preferences - Preference for state-owned enterprises (SOEs) with undemanding valuations, such as **CR Land**, **CR Mixc**, and **Poly PS**. - Distressed companies like **Sunac** and **Shimao** are expected to remain volatile due to policy expectations [1][2]. Additional Insights - Concerns among home buyers include fears of falling prices, job security, and high mortgage payments, which continue to impact market sentiment [13][18]. - The government is likely to set up a real estate stabilization fund, requiring approximately **Rmb4-5 trillion** to effectively manage unsold units and unfinished buildings [19][20]. This summary encapsulates the key points discussed during the conference call, highlighting the current state and future outlook of the China Property sector.

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Summary of Key Points from the Conference Call Industry Overview - **Industry**: China Property - **Date**: October 12, 2024 - **Analysts**: Stephen Cheung, Patrick Jiang, Cara Zhu from Morgan Stanley Asia Limited Core Insights 1. **Funding Support for Inventory and Idle Land Buyback**: The Ministry of Finance has endorsed the use of special bonds for the first time to buy back completed inventory and developers' idle land. This is expected to enhance inventory digestion and potentially improve market sentiment regarding home prices [1] 2. **Tax Regulation Updates**: The government is updating tax regulations to eliminate the differentiation between ordinary and luxury housing, which may simplify the market landscape [1] 3. **Gradual Funding Implementation**: The new funding through special bonds is anticipated to be gradual initially, supplementing the existing Rmb300 billion relending quota. This could facilitate better execution of buybacks due to the longer tenor and reduced involvement of commercial banks [1] 4. **Potential Impact on Housing Market**: If the policy is executed effectively, it could alleviate bearish sentiments among residents regarding home prices, potentially leading to a softer decline in home prices in the upcoming quarters [1] Additional Important Points 1. **Need for More Policy Details**: Analysts emphasize the necessity for more details on the policy to accurately assess its fundamental impact on the market [1] 2. **Market Sentiment**: The anticipated buybacks could reduce housing divestment pressure in the secondary market, contributing to a more stable housing market environment [1] 3. **Analyst Ratings**: The report includes various stock ratings for companies within the China property sector, indicating a mix of Overweight, Equal-weight, and Underweight ratings across different firms [11] Conclusion The conference call highlighted significant developments in the China property sector, particularly regarding government support for inventory management and the potential for improved market conditions. Analysts remain cautious but optimistic about the implications of these policies on housing prices and market sentiment.

M Update Sound Bites | Asia Pacific October 13, 2024 06:05 PM GMT China Healthcare: Chart of the Week – Hong Kong Retail and TCM Sales In August, Hong Kong retailers grossed HK$29.2bn of overall sales and HK$386mn of traditional Chinese medicine sales, down 10% and 12% YoY, respectively. This has relevance for the performance of the Tongrentang group of companies. Play Audio Read more: China Healthcare: Chart of the Week – Hong Kong Retail and TCM Sales (10 Oct 2024) Morgan Stanley Asia Limited+ Laurence Ta ...

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Asia Pacific Equity Research 13 October 2024 China Commercial Property Luxury malls' tenant sales bleak in 3Q; improved but mixed in Golden Week We participated in the property tour hosted by Hang Lung Properties (HLP), visiting two luxury malls in Shanghai (Plaza 66 and Grand Gateway 66) and one in Dalian (Olympia 66). The overall picture echoes our recent takeaways from luxury malls visits in top-tier cities, where HLP's 3Q24 tenant sales remained tepid, particularly in Shanghai. For the Golden Week, foot ...

M Update Chinese Aviation | Asia Pacific October 13, 2024 05:51 PM GMT CAAC – Slot Plans for 2024/25 W/S Season Capacity is not necessarily a constraint to supply in the Winter/ Spring season, we think, considering demand headwinds amid macro challenges. Non-domestic capacity continued to recover to pre-Covid levels. On 12 October, CAAC released slot plans for the 2024 Winter/Spring flight season (October 2024 - March 2025). • Domestic slots to decline by 1% YoY, to +24.2% vs. 2019's level (+0.7% YoY, to +2 ...