Report Industry Investment Rating - Not provided in the given content Core Viewpoints - Due to the escalation of US-China tensions, the Asia IG space widened 3-7bps across the board yesterday, with better selling on certain bonds and better buying on others [2] - China's export resilience strengthens its position in the trade war, leading to a revision of the 2025 export growth forecast from 3% to 4.5%, while maintaining the 2025 import growth forecast at 1.5%. The USD/RMB rate may appreciate from 7.13 to 7.1 by year-end and 7.05 by the end of 2026 [4][15][20] - China Water Affairs (CWAHK) proposes to issue a 5NC3 USD senior blue bond, with the FV of the new CWAHK 30 estimated at 6% [8] Summary by Directory Trading Desk Comments - Asia IG space widened 3-7bps due to US-China tension, with better selling on TW lifers, China TMTs, Japanese banks' bonds, and Southeast Asian names. Some bonds like FAEACO 12.814 Perp and NWDEVLs/LIFUNGs/FOSUNI 26 - 29s decreased in price. In Chinese properties, VNKRLE 27 - 29s and FTLNHD 26/FUTLAN 28 were lower, while some SOE property names had better buying. In Southeast Asia, VLLPM 27 - 29s edged up, and VEDLN 28 - 33s/GLPSPs were down. Long - end Yankee AT1s weakened in the morning and recovered slightly [2] - In the LGFV space, activities picked up with new CNH issues, and the space had a stable session with moderate two - way flows [3] - This morning, there were two - way flows on LGFV names. HAOHUAs recovered 3 - 5bps and HYUELEs recovered 5bps in Asia IG space, while NOMURA and Australian long - end Ts2 widened 2 - 3bps. CWAHK 26 had buyers and was 0.1pt higher [4] Marco News Recap - On Monday, S&P (+1.56%), Dow (+1.29%), and Nasdaq (+2.21%) were higher. The US bond market was closed for Columbus Day, and the UST yield was unchanged, with 2/5/10/30 yield at 3.52%/3.65%/4.05%/4.63% [7] Desk Analyst Comments - CWAHK proposes to issue a 5NC3 USD senior blue bond (Ba1/BB+/-), with the FV of the new CWAHK 30 at 6% considering its CWAHK 26 and peers' valuations, adjusted for rating and tenor differential. The issuance size should be capped at its remaining offshore - issuance quota of USD200mn [8] - The net proceeds will be used to repay offshore debt and finance eligible green projects. The new CWAHK 30 will have a CoC put at 101 [10] - CWAHK is a holding company operating mainly through PRC subsidiaries. The new CWAHK 30 will be guaranteed by non - PRC - incorporated subsidiary guarantors [11] - CWAHK is one of the largest water supply companies in China, focusing on water supply and sewage treatment, generating stable cash flow from exclusive concession rights in 58 districts. It serves various end - users with potential coverage of over 30mn people [12] - In FY25, CWAHK generated HKD11.7bn of revenue and HKD3.4bn of operating cash flow, with an estimated free cash flow of HKD40mn. Total debt was HKD25.6bn, and its operating performance weakened, with revenue and EBIT down c9%. Coverage ratios also weakened [13] - CWAHK is listed in Hong Kong, with the chairman and founder owning 27.4%, ORIX Corp and affiliates holding 27.2%, and Great Wall Life Insurance holding 6.0% [14] China Economy - China's export growth beat expectations as exports to Africa, Latin America, and the EU picked up. Exports of integrated circuits and ships remained robust, while personal consumption goods were subdued. Imports rebounded across the board, especially in processing trade. China's rare earth export control is a countermeasure to US semiconductor export restrictions. Trade tensions may intensify in the next two weeks before potentially easing after a possible Trump - Xi meeting [15] - Exports rebounded in September, reaching 8.3% YoY from 4.4% in August, beating market expectations. Exports to the US remained in deep contraction, while shipments to Africa, the EU, and Latin America accelerated. Exports to ASEAN moderated. Since the tariff shocks, exports to ASEAN and Africa have increased significantly, making up for over 120% of the export losses to the US since April. Trade surplus narrowed to US$91bn in September [16] - Integrated circuits and ships had strong growth in September, while personal consumption goods moderated. Low - value - added exports and housing - related products were hit by tariffs. Rare earth exports rebounded despite additional export controls [17] - China's imports increased to 7.4% in September from 1.3% in August, beating market expectations. Imports from the US steadied at - 16%. Import value of processing trade accelerated. For energy products, crude oil import volume rose, while coal and natural gas dropped. Raw material imports had mixed results, and crop imports picked up [18] Offshore Asia New Issues - No offshore Asia new issues were priced today [22] - There are several issuers in the pipeline, including the Macau Branch of Bank of China Limited, Jinan Hi - tech International, and KEB Hana Bank, with different tenors, coupons, and issue ratings [23] News and Market Color - Yesterday, 118 credit bonds were issued onshore with an amount of RMB138bn. Month - to - date, 191 credit bonds were issued with a total amount of RMB212bn, a 19.7% yoy increase [24] - Indonesia plans to shorten the permit process for geothermal projects to three months [24] - Country Garden's top shareholder agrees to a USD1.14bn debt - to - equity swap and will hold scheme meetings on 5 Nov'25 for creditors to vote on its offshore restructuring plan [24] - Freeport Indonesia halts the Gresik smelter due to a mine landslide [24] - China Energy Overseas will redeem GEZHOU 4.15 Perp of USD200mn on 25 Nov'25 [24] - LG Electronics expects a 8.4% yoy drop in 3Q25 operating profit due to higher tariffs [24]

Group 1: Trade Developments - President Donald Trump announced an additional 100% tariff on Chinese imports, effective November 1, 2025, escalating the ongoing trade war between the U.S. and China [2][9] - The tariff is a response to China's new export controls on critical rare earth minerals and software, indicating a significant shift in trade relations [2] Group 2: Market Reactions - The cryptocurrency market experienced its largest decline in 2025, with Bitcoin dropping by 8.4% to $104,782, resulting in an estimated $19 billion loss across the crypto market [3][9] - Asian equity markets are expected to suffer, with the Hang Seng Index projected to drop by 2.5% at market open, reflecting investor concerns [4][9] - Major Chinese technology companies, including Alibaba and Tencent, are anticipated to see significant declines in Hong Kong trading [4][9] - China Vanke shares are forecasted to fall by as much as 4.6% following the resignation of its chairman, impacting the real estate sector [4][9] Group 3: Central Bank Actions - The People's Bank of China injected 137.8 billion Yuan into the market through 7-day reverse repos at a rate of 1.40%, aiming to stabilize the financial system amid trade uncertainties [5][9] - The central bank fixed the USDCNY reference rate at 7.1007, a stronger fixing than the previous rate of 7.1048, indicating efforts to support the yuan [5][9] Group 4: Geopolitical Context - Canadian Prime Minister Mark Carney participated in a Gaza Peace Summit in Egypt, highlighting ongoing geopolitical developments [6][9] - France's newly appointed Prime Minister Sebastien Lecornu unveiled his cabinet amid domestic political turmoil, which has affected French bond futures and the euro [6][9]

Summary of China Property Weekly Wrap Industry Overview - The report focuses on the **China Property** industry, highlighting recent trends in urban development and real estate transactions. Key Highlights 1. **Policy Initiatives**: The State Council issued opinions on promoting high-quality urban development, emphasizing: - Revitalization of urban property stock through comprehensive surveys of existing buildings and land to repurpose underutilized properties [1] - Development of high-quality housing supported by improved property management services and redevelopment initiatives for urban villages and aging communities [1] 2. **Market Performance**: - Primary transactions improved modestly, with new home sales volume up **19% week-over-week (wow)** and **1% year-over-year (yoy)**, particularly in tier-2 and Central Western cities [5] - Secondary transactions remained flat, with a **1% increase wow** and **6% yoy** [5] - New home search activity declined by **0.8% wow**, while secondary visitor traffic fell by **2% wow** [2] 3. **Shanghai Performance**: - In the first week post-HPR relaxation, new home sales in Shanghai dropped by **27% wow**, but new home search activity rose by **6% wow**, indicating improved sentiment [2] 4. **Transaction Data**: - Year-to-date (YTD) primary gross floor area (GFA) sold decreased by **5% yoy**, while secondary GFA sold increased by **12% yoy** [7] - Inventory balance increased by **0.2% wow** but decreased by **3.7% from end-2024 levels**, with inventory months at **25.8** [34] 5. **Valuation Trends**: - Offshore developers' average share price fell by **4% wow**, while onshore developers also saw a **4% decline wow** [45] - Offshore coverage trades at an average **33% discount** to end-2025 estimated net asset value (NAV) [45] 6. **Completions and New Starts**: - Completions are expected to decline by **20% yoy** in August 2025, with a **10% yoy** decline projected for the full year [38] - New starts are anticipated to record a mid-teens level yoy decline in August [7] 7. **Home Appliance Sales**: Expected to decline yoy in August based on secondary sales trends across approximately 20 cities [7] Additional Insights - The report indicates a mixed sentiment in the property market, with primary market transactions showing some recovery while secondary market activity remains subdued. - The focus on urban renewal and high-quality housing development reflects a strategic shift by policymakers to enhance urban living conditions and stimulate the property market. - The decline in new home sales in Shanghai post-HPR relaxation suggests that while sentiment may be improving, actual transaction volumes are still under pressure. This summary encapsulates the key points from the China Property Weekly Wrap, providing insights into the current state and future outlook of the property market in China.

Market Trends & Expectations - Chinese developers' shares are rallying, indicating positive market sentiment [1] - China Vanke's shares hit a six-month high, reflecting investor confidence [1] - The rally is driven by expectations of more supportive measures from authorities for the property market [1] Industry Dynamics - The property market is currently experiencing a slump, necessitating government intervention [1]

Summary of the Conference Call on China's Property Market Industry Overview - The focus is on the **China Property** market, specifically addressing the challenges of clearing housing inventory and stimulating demand in the context of economic recovery. Key Points and Arguments 1. **Positive Feedback Loop**: Forming a positive feedback loop is essential to overcome deflationary pressures and weak demand, drawing lessons from historical government interventions in the 90s Shanghai property market [1] 2. **Supply and Demand Dynamics**: There is a need to build more housing units in tier-1 and tier-2 cities, with a benchmark housing supply ratio of 1.1-1.15X observed in developed countries. This could help revive upstream industries and stimulate demand [2] 3. **Historical Context**: The current housing industry and macroeconomic backdrop differ significantly from the late 90s, suggesting that the impact of accelerated housing construction will be smaller than in previous cycles [2] 4. **Funding Requirements**: Developers may require a liquidity injection of **Rmb1.4tn-2.8tn** to cover incremental construction and land purchases, with an ideal scenario needing up to **Rmb1.1tn** if demand stimulus is effective [5] 5. **Household Subsidies**: To improve affordability, an estimated **Rmb0.2tn-1.0tn** in subsidies may be necessary, alongside further mortgage easing and removal of home purchase restrictions in tier-1 cities [5] 6. **Market Activity Recovery**: Property market activities are expected to moderately recover to 2022-2023 levels under different scenarios [7] 7. **ASP Trends**: There has been a renewed weakening trend in Average Selling Prices (ASP) across 70 cities, with Class I cities experiencing the steepest month-on-month decline since October 2024 [10][11] 8. **Inventory Management**: Without additional sales, inventory levels in tier-1 and tier-2 cities could surge significantly, necessitating additional sales volume to maintain manageable inventory levels [65] Additional Important Insights 1. **Historical Case Study**: The late 90s housing market reform in China led to oversupply but was eventually resolved through targeted stimulus measures, which could provide a framework for current policy responses [27][28] 2. **Economic Contribution**: The property sector's contribution to GDP has decreased from a peak of 27% to the high-teen percentage level, indicating a need for revitalization [48] 3. **Developer Implications**: Liquidity injections are expected to benefit developers with land banks in higher-tier cities, but increased supply competition may pressure pricing and delay margin recovery [82][83] 4. **Leverage and Funding Gaps**: Developers may face significant funding gaps, with estimates suggesting a gap of **Rmb4.2tn-5.7tn** by the end of 2026 under different scenarios [55] 5. **Affordability Challenges**: The average home price to income ratio in tier-1 cities is above 20X, indicating a significant affordability gap that needs to be addressed through subsidies and easing of restrictions [64][72] This summary encapsulates the critical insights and data points discussed in the conference call regarding the current state and future outlook of the China property market.

Investment Rating - The report maintains a positive view on select covered developers, reiterating Buy ratings on CRL, COLI, Greentown, Jinmao, and Longfor [6][50][51]. Core Insights - The housing supply ratio in China is currently at 1X, which is lower or comparable to other sample countries, indicating potential for improvement as inventory is disclosed [2][8]. - The report identifies that 37% of sample cities have a housing supply ratio below 0.9X, while 26% have a ratio above 1.1X, with the excess inventory concentrated in Tier-3 and Tier-4 cities [8][14]. - The analysis suggests that a long-term housing supply ratio of 1.1X is reasonable, implying a potential funding need of Rmb0.7tn-1.6tn for inventory buybacks, which is equivalent to 0.5-1.2% of national GDP [6][35][36]. - The government has accelerated land buyback efforts, announcing nearly Rmb400bn in buybacks, primarily focused on lower-tier cities [6][37][47]. Summary by Sections Housing Supply Ratios - The report examines 78 cities, accounting for approximately 50% of China's population and housing stock, revealing a housing supply ratio of 0.7X for Tier-1 cities, 0.89X for Tier-2 cities, and 1.02X for Tier-3/4 cities [6][8][11]. - The report builds four illustrative cases to analyze how housing ratios could change based on different assumptions regarding urban household formation and living space per capita [27][28]. Inventory Analysis - As of end-1Q25, the sample cities are estimated to have 1.5 billion square meters of unsold residential inventory, with nearly half remaining as raw land [22][25]. - The average saleable inventory is projected to last 26 months, while total unsold inventory could take up to 6 years to clear [25][22]. Developer Performance - The report highlights that covered developers have shown more resilient primary average selling price (ASP) performance compared to secondary markets, with a significant portion of land investment concentrated in top-performing markets [50][51]. - The expected improvement in margins and return on equity (ROE) beyond 2027 is supported by better investment strategies and decreasing contributions from older low-margin land banks [51][60].

Investment Rating - The report maintains a positive outlook on the market with a base case index target for MXCN at 67 by the end of 2025, with a preference for sectors such as Energy, IT, and Utilities [36][38]. Core Insights - The report indicates a recovery in the MXCN index, driven by sectors like IT and Healthcare, with expectations of a market reversal by late January 2025 [9][11]. - The report highlights a cautious approach towards Consumer Discretionary and Staples, recommending a rotation into quality laggards and large caps over small and mid-caps [36][38]. - The anticipated GDP growth for China in 2025 is projected at 4.1%, slightly below the consensus of 4.2% [10]. Market & Sector Performance - MXCN sectors performance shows Consumer Discretionary up by 3.2% week-on-week, while Information Technology leads with an 8.3% increase [6]. - The MSCI China index has shown a year-to-date increase of 9.0%, with a notable recovery in sectors impacted by US tariffs [7][12]. Catalyst Calendar - The report outlines key upcoming macroeconomic indicators and sector-specific data releases, including PMIs and housing transactions, which could influence market movements [14]. Consensus Macro Forecasts - The consensus forecasts for China's GDP growth in 2025 are 5.1% for Q1, declining to 3.9% by Q4, indicating a gradual slowdown [16]. Index Targets - The MSCI-China index target for 2025 is set at 71, with a bull case of 80 and a bear case of 70, reflecting a potential upside of 13% from current levels [18]. - The CSI-300 index target for 2025 is projected at 3,787, with a bull case of 4,150, indicating a 10% upside potential [19]. Investment Recommendations - The report recommends overweight positions in Energy, IT, and Utilities, while advising underweight positions in Consumer Discretionary, Materials, and Staples [39]. - A barbell strategy is suggested, focusing on high-yielders and selected thematic plays in Internet and AI sectors [36][38]. Trading Statistics - Recent trading statistics indicate a net outflow of US$796 million from China equities, primarily driven by passive fund outflows, although there has been a positive development with resumed offshore ETF inflows [79][80].

Summary of the Conference Call on Hong Kong and Mainland China Real Estate Industry Overview - **Industry**: Real Estate in Hong Kong and Mainland China - **Date**: 28 February 2025 Key Points and Arguments Hong Kong Real Estate 1. **New World Development**: Released a new price list for 41 units in State Pavilia, priced between HKD 7.8 million to HKD 14.3 million per unit, translating to HKD 21,807 to HKD 32,333 per square foot after discount [5] 2. **Centa-Valuation Index (CVI)**: Declined by 4.37 percentage points week-over-week to 36.89 points, indicating potential downward pressure on property prices if it does not recover above 40 points [6] 3. **Coasto Project**: Wang On Properties reported 1,100 indications of interest for 60 units, resulting in a 17x oversubscription, with unit prices ranging from HKD 3.8 million to HKD 7.2 million [7] 4. **Sun Hung Kai Properties**: Noted signs of business improvement in the first half of the year, including faster property sales and landbank replenishment, suggesting the end of the earnings decline cycle [4] Mainland China Real Estate 1. **Land Sales in Shanghai**: The city plans to sell 13 sites with a total reserve price of RMB 11.3 billion, with significant sites in Minhang and Qingpu districts [8] 2. **CR Land Acquisition**: Acquired a plot in Beijing's Shunyi District for RMB 6 billion, with a plot ratio of 1.0 and an average value of approximately RMB 35,000 per square meter [9] 3. **Logan Group**: Over 80.8% of offshore creditors approved a debt restructuring plan, indicating progress in financial recovery [10] Market Valuation and Performance 1. **Valuation Summary**: Various Hong Kong property developers have target prices significantly above current market prices, indicating potential upside. For example, CK Asset has a target price of HKD 44.60 compared to a current price of HKD 33.90 [12] 2. **Share Price Performance**: The report includes a detailed performance analysis of various companies, showing a mixed performance over different time frames, with some companies like New World Development experiencing significant declines [21] Additional Insights 1. **Rental Pipelines**: Solid rental pipelines are expected to provide visibility on dividend outlooks for companies like Sun Hung Kai Properties [4] 2. **Market Trends**: The report highlights a cumulative decline in the CVI over the past three weeks, suggesting a cautious outlook for property prices in the near term [6] Conclusion The conference call provided a comprehensive overview of the current state of the real estate market in Hong Kong and Mainland China, highlighting both challenges and opportunities. Key players are showing signs of recovery, but market indicators suggest caution moving forward.