Vi e w p o i n t | 29 Jan 2026 01:59:47 ET │ 13 pages China Property Three Red Lines to Ease but Unlikely to Leverage Up for Investment in ST CITI'S TAKE Policies pacing up: talk of easing "three red lines" — Property firms are no longer required to report "three red lines" indicators to authorities (Bloomberg, 29 Jan). We note the "three red lines" were implemented since Aug'2020 in an aim to limit debt and encourage sector deleveraging. Indeed, after the Qiushi Journal article (link) that set a supportive ...

Summary of China Property FY25E Preview Industry Overview - The report focuses on the **China Property** sector, particularly the financial outlook for FY25E and the implications for FY26-30E. Key Points and Arguments Financial Performance Expectations - **Kitchen Sinking**: Anticipated write-offs and lower gross profit margins (GPM) in FY25E are expected to create a lower base for a fresh start in 2026-30E, with most companies likely to report profits rather than losses, especially state-owned enterprises (SOEs) [1] - **Sales Targets Ambiguity**: There is uncertainty regarding sales targets for FY26E due to challenges in the second half of FY25 and a high base in Q1 2025, leading to expected declines in Q1 2026 [1] - **De-stocking and Inventory Management**: De-stocking efforts are on track, but lower sales are expected due to new product offerings (version 4.0) that provide better quality [1] - **Restructuring Outcomes**: Companies that have completed restructuring are projected to post significant net profits following debt reductions or debt-to-equity swaps, with questions raised about potential second restructuring plans [1] Earnings Downgrades and Misses - **Core Profit Decline**: A 34% decline in core profits is expected across 15 companies with no credit issues, with GPM dropping to 13.9% from 15.5% in 2024 [2] - **Specific Company Performance**: - **CRL**: Expected to miss expectations with a 17% year-over-year decline, reporting RMB 21.2 billion, primarily due to the absence of REIT disposal gains [2] - **Longfor**: Anticipated loss of RMB 2 billion, with stable recurring profits but no dividends [2] - **Poly Development**: Announced an 85% profit decline [2] - **Yuexiu**: Expected to report minimal profit due to write-offs [2] - **Greentown**: Similar challenges noted [2] Land Investment Trends - **Land Acquisition Growth**: Listed companies are expected to increase land investments by 15% year-over-year, with 58% of acquisitions occurring in the first half of FY25 [4] - **Top Buyers**: The top five companies accounted for 71% of the sector's land acquisitions, with notable growth from COGO (+96% year-over-year) and Jinmao (+78%) [4] Balance Sheet and Cash Flow - **Cash Flow Pressure**: Expected to alleviate in FY26E as capital expenditures for pre-sales delivery peak in FY25 [5] - **Debt Management**: Companies are likely to focus on extending debt tenures at low costs while maintaining positive cash flow [5] Market Reactions and Policy Implications - **Short-lived Rebound**: The sector saw a positive reaction to policy easing expectations, but any rebound is expected to be short-lived due to anticipated sales declines and earnings cuts [6] - **Luxury Retail Performance**: Positive same-store sales growth in luxury malls was noted, but December showed a deceleration, missing expectations [6] Strategic Recommendations - **Top Picks**: Recommended stocks include Jinmao, CRL, and COLI based on their performance outlook [6] Additional Insights - **Dividend Payout Ratios**: Companies like Midea Real Estate are expected to maintain high payout ratios, while others like Longfor and Greentown are likely to cut dividends [12] - **Valuation Metrics**: The report includes various valuation metrics for companies within the sector, indicating significant NAV discounts and varying P/E ratios [18] This summary encapsulates the critical insights and projections for the China Property sector as outlined in the conference call, highlighting both challenges and potential opportunities for investors.

Summary of Conference Call on China Property Industry Industry Overview - The report focuses on the China property industry, specifically analyzing the land acquisitions and sales outlook for 2025 and 2026 [1][10]. Key Findings on Land Acquisitions - **Land Purchase Growth**: The value of land purchases by listed companies increased by 15% year-over-year (yoy) to RMB 478 billion, contrasting with a 7% decline in 300 cities [2][16]. - **Acquisition Concentration**: Only 13 listed companies participated in land purchases in 2025, accounting for 43% of the total, with the top five companies responsible for 71% of the acquisitions [4][24]. - **Geographic Focus**: There was a slight increase in spending in Tier-2 cities, which accounted for 42% of total land purchases in 2025, up from 40% in 2024 [3][32]. - **Top Buyers**: The leading companies in land acquisition included COLI, Poly China, and CR Land, with significant yoy growth from COGO (+96%), Jinmao (+78%), and CMSK (+56%) [4][26]. Sales Outlook - **Sales Projections**: Estimated sales for 2026 are expected to decline by 16% yoy, following a 25% decline in 2025. State-owned enterprises (SOEs) are projected to have a smaller decline of 6%, while non-SOEs may see a 17% drop [6][19]. - **Luxury Market Resilience**: High-end properties in core cities are expected to perform better, with companies like Jinmao and Greentown projected to achieve slight sales growth [6][19]. - **Market Dynamics**: The majority of land acquisitions were made by SOEs, which accounted for 75% of land purchases in 2025, indicating a trend towards consolidation in the market [6][19]. Financial Metrics - **Attributable Sales Ratio**: Land purchases represented 33% of attributable sales, marking a new high since 2021, indicating increased investment appetite among leading companies [2][20]. - **Cost Trends**: The average land acquisition cost increased by 23% yoy, reflecting a premium for prime land in Tier-1 and Tier-2 cities [3][20]. Additional Insights - **Market Conditions**: The land market was more active in the first half of 2025, driven by a recovery in sales and a decrease in inventory levels in top cities. However, activity slowed in the second half due to declining sales and secondary price drops [19][36]. - **Strategic Focus**: Companies are increasingly focusing on acquiring high-quality land rather than engaging in indiscriminate purchases, with a notable shift towards securing resources in economically robust Tier-2 cities [15][32]. Conclusion - The China property market is experiencing a complex landscape characterized by selective land acquisitions, a focus on high-quality assets, and a challenging sales environment. The performance of leading companies will be critical in navigating these dynamics as they prepare for 2026.

Summary of Conference Call on China Property Market Industry Overview - The conference call focused on the **China Property** market, specifically analyzing the sales performance of listed property companies in December 2025 and the impact of recent policy changes on the market. Key Points and Arguments December Sales Performance - December sales for 37 listed property companies showed a **22% year-over-year (YoY) decline** but a **40% month-over-month (MoM) increase**, exceeding low expectations due to strong luxury home sales [1] - Notable sales included: - **CRL**: Rmb 41 billion (+28% YoY) - **COLI**: Rmb 40 billion (-1% YoY) - **CMSK**: Rmb 26 billion [1] - High-end projects in cities like Shenzhen, Shanghai, and Beijing drove sales for CRL and COLI, while **Sunac** saw a **70% increase** due to a low base and new launches in Wuhan [1] - **81% of listed companies** experienced a YoY sales drop, indicating a challenging market environment [1] Sales Forecasts - For 2025, a **21% YoY decline** in sales is expected for listed companies, with only **Jinmao** projected to grow by **16%** [3] - The average sales forecast for 2026 is a **12% YoY decline**, with luxury homes and resources being key factors influencing this outlook [3] Secondary Market Trends - Secondary sales dropped **30% YoY** and remained flat MoM in December, hindered by price cuts and a high number of listings (4.64 million units) [1] - The average weekly transaction volume in December was **24.3k units**, comparable to June 2025, but showed a **1.8% YoY decline** [1] Policy Impacts - The **Ministry of Finance** reduced the VAT on homes sold within two years from **5% to 3%**, maintaining a **0% VAT** for homes resold after two years [2] - Local policies in cities like Beijing and Shanghai have eased purchase restrictions and provided subsidies to stimulate demand [2] - The overall impact of these policies is viewed as positive but potentially marginal in terms of immediate market recovery [2] Market Sentiment and Future Outlook - The property sector's share prices corrected in December due to weak sales and disappointing policy easing expectations [4] - Analysts anticipate a round of earnings downgrades in January 2026, particularly for well-known companies, as household confidence remains low [4] - Despite the challenges, luxury mall retail sales showed positive same-store sales growth in Q4, indicating some resilience in the luxury segment [4] - Top investment picks include **Jinmao**, **C&D**, and **CRL** [4] Additional Important Insights - The conference highlighted the ongoing challenges in the property market, including the need for effective policy measures to stabilize the sector and improve consumer confidence [4] - The focus on high-quality urban renewal and targeted local policies is seen as essential for long-term recovery [2][4] This summary encapsulates the key insights from the conference call regarding the current state and future outlook of the China property market, emphasizing the impact of sales performance and policy changes on industry dynamics.

Summary of China Property Market Conference Call Industry Overview - The conference call focused on the **China Property** market, highlighting significant declines in various metrics related to real estate investment and sales. Key Points Real Estate Investment (REI) Trends - **November REI** experienced a record drop of **30.3% YoY**, marking the sharpest decline on record, with a total of **RMB 0.5 trillion**, the lowest monthly figure since April 2012 [1][11] - **Completion rates** fell by **26% YoY** in November, slightly improved from **28%** in October [1] - **Starts** decreased by **28% YoY**, consistent with a **29%** decline in October [1] - **Residential sales** dropped by **28% YoY**, the largest single-month decline since May 2024 [1] - The **70-cities price index** for new homes decreased by **2.8% YoY** in November, while secondary homes saw a **5.7% YoY** decline [1] Market Dynamics - **Secondary market sales** in 18 key cities fell by **22% YoY** in November, with average weekly volume showing a **13% MoM** increase, driven by price cuts [2] - Listings in 39 cities remained stable, but cities like Shenzhen and Xi'an saw increased listings, putting pressure on prices [2] - A survey indicated only **9%** of depositors expect housing prices to rise in 2026, a historical low [2] Future Projections - The outlook for 2026 suggests a **structural decline** in the market unless liquidity improves, with expectations of: - **REI** down **13% YoY** - National sales down **11% YoY**, with residential sales projected at **RMB 6.8 trillion** [3] - New home average selling prices (ASP) expected to fall by **3% YoY** [3] - Starts anticipated to drop to levels last seen in 2003, with a **15% YoY** decline [3] Policy and Regulatory Environment - The **Central Economic Work Conference (CEWC)** indicated a more proactive policy tone, with potential demand-side easing measures expected in Q4 2025 [4] - Urban renewals and REIT approvals are likely to accelerate, but significant changes in home price expectations are not anticipated due to ample supply [4] - Monitoring for targeted monetary easing or pro-leverage initiatives is advised, though the likelihood remains low [4] Market Sentiment and Investment Recommendations - The sector's share prices corrected in early December amid debates over weak sales and expectations of policy-driven rebounds, particularly following Vanke's debt extension [5] - Anticipated earnings downgrades in December and January for well-known names in the sector [5] - Luxury mall retail sales are expected to maintain a positive trend in Q4 after outperforming in Q3 [5] - Recommended stocks include **Jinmao, C&D, and CRL** as top picks [5] Additional Insights - The **macro environment** shows mixed signals, with November exports beating expectations at **5.9% YoY**, while retail sales decelerated to **1.3% YoY** despite a higher CPI of **0.7%** [1] - Fixed Asset Investment (FAI) remains weak, down **12%** YoY, with a cumulative decline of **2.6%** for the first eleven months [1] This summary encapsulates the critical insights from the conference call regarding the current state and future outlook of the China property market, emphasizing the significant challenges and potential policy responses.

Imagine creditor-on-creditor crime, @shuli_ren writes. As Vanke slides into financial distress, its largest shareholder is in land-grabbing mode (via @opinion) https://t.co/C0owZgYoRB ...

Company Developments - iRobot (IRBT) has filed for bankruptcy protection and will go private after being acquired by its primary manufacturer [3] - SpaceX (SPACE) is in the process of selecting investment banks for a potential IPO, targeting a valuation of up to $1.5 trillion [5] - SpaceX has initiated a secondary share sale valuing the company at $800 billion, with shares priced at $421 each [6] - Alphabet (GOOG) stands to gain significantly from its investment in SpaceX, with an expected accounting gain linked to its stake [7] Industry Insights - Concerns over China's property sector have resurfaced as Vanke's bondholders rejected its bond payment plan, increasing default risks [4] - The tech trade between the US and UK is at risk of collapse due to disagreements [8] - Developers have canceled nearly 2,000 power projects this year, indicating potential shifts in the energy sector [8]

Vanke was once considered too big to fail. Now it's facing a possible meltdown with more than $50 billion of debt in question https://t.co/Mr0FSYVU2K ...

Summary of Key Points from J.P. Morgan's Conference Call on Mainland China and Hong Kong Property Industry Overview - The conference call focused on the property sectors in Mainland China and Hong Kong, highlighting investor sentiment and stock performance trends [1][2]. Key Insights on Mainland China Property - **Investor Sentiment**: There is a mixed feedback regarding expectations for the upcoming Politburo and CEWC meetings, with hedge funds (HFs) looking for short-term trading opportunities due to deteriorating housing market data [5]. - **Stock Interest**: CR Land and CR Mixc are the most enquired stocks among Mainland China property companies, while SHKP, Link REIT, Henderson, Sino, and Hang Lung are of higher interest among Hong Kong property companies [1]. - **Earnings Expectations**: Investors expect a single-digit percentage decline in FY25 earnings for CR Land, with concerns that earnings may drop to a mid-teens percentage decline due to delays in disposals [6]. - **CR Mixc Performance**: Strong interest in CR Mixc is noted, with a 10-15% same-store tenant sales growth in 10M25. However, investors are cautious about its high P/E ratio (>20x) and are waiting for a better entry point [6]. Key Insights on Hong Kong Property - **Market Recovery**: Most investors agree that the Hong Kong residential market is recovering, but there is uncertainty regarding which stocks to invest in. SHKP is favored, but its 3.8% dividend yield is seen as unattractive by some [8]. - **Sino Land Performance**: Sino Land has performed well (+44% YTD), but concerns exist regarding its future earnings and landbank replenishment. Generalist investors are more focused on its high dividend certainty [8]. - **Henderson Land Concerns**: Investors are worried about potential dividend cuts, although recent management comments have alleviated some concerns [9]. - **Hang Lung's Recovery**: Hang Lung has seen a notable improvement in tenant sales, which has attracted more interest from long-only investors (LOs) [10]. - **Link REIT's Cautious Outlook**: Investors were surprised by Link REIT's cautious tone regarding negative rental reversion, which is expected to worsen. Many are waiting for signs of improvement before investing [10]. Valuation Insights - **Valuation Metrics**: The report includes a valuation summary for both Mainland China and Hong Kong property sectors, indicating various P/E ratios, dividend yields, and share price returns for key companies [11][13]. - **Investor Preferences**: There is a shift in investor focus from dividend yield to P/E and NAV discount as the market sentiment becomes more risk-on, although dividend yield remains a primary valuation yardstick for many [10]. Additional Considerations - **Short-Term Trading**: Some hedge funds are interested in short-term trades ahead of government meetings, particularly if CR Land trades below HK$29 and Longfor below HK$10 [5]. - **Vanke's Bond Extension**: Most property-focused investors are not overly concerned about Vanke's bond extension, viewing it as a non-surprising development [5]. This summary encapsulates the key points discussed during the conference call, providing insights into investor sentiment, stock performance, and valuation metrics within the property sectors of Mainland China and Hong Kong.

Vanke's offshore creditors are fielding requests for talks with potential advisors, a sign they're preparing for a worsening of the developer’s debt crisis https://t.co/nlYIqpux6D ...