Core Viewpoint - The report from Huayuan Securities indicates a recovery in the second-hand housing market in key cities like Shanghai and Shenzhen since January, suggesting a marginal improvement in supply-demand dynamics. The firm believes that the current real estate adjustment in China may have reached a relatively sufficient level in both time and space, with the overall success rate of the real estate sector expected to gradually increase against a backdrop of deep industry clearing and continuous policy support [1]. Group 1: Policy Adjustments - The new housing policy released in Shanghai on February 25 includes significant adjustments: 1) Purchase restrictions have been relaxed, allowing non-local residents to buy homes with a social security or tax record of just one year, and those with five years of residency can purchase one property citywide [1] 2) The maximum loan amount for first-time homebuyers using housing provident fund has increased from 1.6 million to 2.4 million, with potential increases to 3.24 million for families with multiple children or those purchasing green buildings [1] 3) Property tax exemptions are provided for adult children of local residents when purchasing their family's only home [1]. Group 2: Market Stability Intent - The government has been actively releasing positive signals since early 2026, with notable mentions in the first issue of "Qiushi" magazine regarding the financial asset nature of real estate and the need for comprehensive policy support. The initiation of state-owned enterprise land reserves for affordable housing in specific districts is expected to further enhance market confidence and stimulate transactions [2] 1) The relaxation of purchase restrictions will include groups with insufficient social security records, broadening the pool of potential buyers [2] 2) Increased loan limits and optimized recognition standards will lower purchasing costs, encouraging first-time and upgrading buyers [2] 3) The tax exemption for local adult children will reduce the cost of property exchanges for local families, promoting demand for upgrades [2]. Group 3: Market Outlook - The Shanghai housing market has shown signs of recovery since the beginning of 2026, with January seeing 22,800 second-hand homes sold, a year-on-year increase of 24.2%. The inventory situation is improving, with a continuous decline in the number of listings over the past nine months. Price stabilization is also evident, with a slight decrease in the leading index indicating a narrowing of the decline compared to December 2025 [3]. The combination of recovering transaction volumes, decreasing listings, and ongoing policy support suggests a promising "small spring" for the Shanghai market [3]. - Investment recommendations include focusing on quality real estate companies with ample land reserves and reduced impairment provisions, such as China Resources Land, China Merchants Shekou, and others, as well as intermediaries benefiting from transaction volume recovery like Beike-W [3].

Core Viewpoint - The real estate market in China is undergoing a significant correction after years of rising prices, with various factors contributing to this shift, leading to a more cautious outlook for the future [1][14]. Group 1: Market Dynamics - The trajectory of China's real estate over the past two decades has not been a smooth ascent but rather a rapid rise followed by a sudden halt [3]. - For a long time, rising property prices were a common belief, with the assumption that as long as cities developed and populations flowed, prices would continue to rise [5]. - The long-term increase in property prices was supported by three main factors: continuous population inflow, rapid urbanization, and a loose financial environment [7]. - Recent years have seen a simultaneous change in these factors, including a declining birth rate and a slowdown in population inflow in many cities [9]. - Urbanization is no longer as rapid as before, leading to a decrease in new housing demand, while high leverage in the residential sector has begun to reveal risks [10]. Group 2: Industry Challenges - The real estate industry has faced increasing issues, such as inventory buildup, tight cash flow, and pressure on project delivery, due to a reliance on high turnover and high leverage [12]. - The downturn in the real estate market is not attributed to a single policy or year but is seen as a concentrated correction after long-term accumulation of issues [14]. - The exit of prominent investors, such as Li Ka-shing, reflects a recognition that the market has reached a turning point, where risks outweigh opportunities [15]. Group 3: Policy Changes - Starting in 2024, there has been a noticeable increase in policy measures aimed at the real estate market, including lowering down payments, interest rates, and tax reductions [17]. - These policies aim to alleviate cash pressure on homebuyers, facilitating transactions for genuine housing needs rather than encouraging speculation [19]. - The focus of current policies has shifted from stimulating demand to stabilizing the market, creating a "safety net" rather than a "launchpad" for price increases [25]. Group 4: Future Outlook - By 2026, the real estate market is expected to enter a prolonged bottoming phase, with a slower pace of decline and a clearer differentiation among cities based on their economic fundamentals [29]. - Changes in living arrangements are anticipated, with renting becoming a long-term choice for many families, impacting the structure of housing demand [30]. - The criteria for evaluating property value are being reshaped, with a greater emphasis on living experience and community amenities rather than just potential price appreciation [31]. - The real estate industry is transitioning from a focus on scale and speed to one emphasizing quality and operational stability, making risk management and product suitability more critical for developers [33].

Report Summary 1. Industry Investment Rating The report does not mention the industry investment rating. 2. Core Viewpoints - Since 2024, the number of new bond - issuing industrial entities has significantly increased under the strict supervision of urban investment bonds. The new industrial entities from January 1 to August 26, 2025, are mainly concentrated in low - to - middle administrative levels, with over half of them having an AA+ rating and mostly located in economically developed provinces. The marginal supply increment of industrial bonds brought by these new entities is difficult to substantially alleviate the shortage of credit bond assets [1][2]. - Newly - issued bonds of new industrial entities often have an excess spread at the initial listing stage due to liquidity and market cognitive differences, and the excess spread tends to narrow to varying degrees after listing. It is recommended to select bonds from industries with relatively good prosperity (such as social services) and focus on bonds issued by urban investment subsidiaries [3]. 3. Summary by Directory 3.1 Newly - Issued Bond Industrial Entities Inventory - **Quantity change**: Since the second half of 2023, under the strict supervision of urban investment bonds, the number of new bond - issuing industrial entities has increased. In 2024, there were 133 new industrial bond - issuing entities, and from January 1 to August 26, 2025, 191 industrial entities entered the capital market for bond financing. The number of new industrial bond - issuing entities from January to July 2025 showed a fluctuating upward trend, with 41 entities in July alone [1][4]. - **Administrative level**: Among the 191 new industrial bond - issuing entities from January 1 to August 26, 2025, 63 were district - level state - owned enterprises and 62 were prefecture - level state - owned enterprises, showing a concentration in low - to - middle administrative levels. The 63 new district - level industrial entities were mostly concentrated in economically developed provinces such as Shandong, Zhejiang, Guangdong, and Jiangsu [8]. - **Subject rating**: Among the new industrial bond - issuing entities from January 1 to August 26, 2025, 103 had an AA+ rating, accounting for 54%, followed by 52 with an AA rating and 31 with an AAA rating, mainly medium - and low - credit - rated entities [8]. - **Industry distribution**: The top five industries with the largest number of new industrial bond - issuing entities from January 1 to August 26, 2025, were comprehensive (47), social services (31), building decoration (24), non - bank finance (18), and real estate (10) [13]. - **Regional distribution**: New industrial bond - issuing entities were mostly concentrated in economically developed provinces such as Shandong (30), Jiangsu (24), Guangdong (17), and Zhejiang (17) [13]. - **Asset scale**: Most of the industrial entities that first appeared in the bond market in 2025 were small - scale. Among the 191 new industrial bond - issuing entities from January 1 to August 26, 2025, 47% had a total asset scale of less than 100 million yuan, and 49% had a net asset scale of less than 50 million yuan. Among the 81 industrial entities with a total asset scale of less than 100 million yuan, 32 were subsidiaries of urban investment companies [17]. - **Bond issuance scale and use of funds**: The total issuance scale of bonds issued by new industrial entities from January 1 to August 26, 2025, was 13.78 billion yuan, mainly private placement corporate bonds. The funds were mainly used to repay interest - bearing debts (8.08 billion yuan, accounting for 59%), and some were used for project construction, supplementary working capital, and other purposes [20]. - **Ways for urban investment entities to increase bond quotas**: Bond - financing - restricted urban investment entities usually use subsidiaries as issuers to try to increase bond quotas, mainly by injecting assets into existing subsidiaries or stripping urban investment - related businesses. The former is the preferred method, but the single - bond quota of urban investment subsidiaries is usually small [23]. 3.2 How to Evaluate the Investment Value of New Industrial Entities - **Value discovery process**: In the first five trading days after the listing of bonds issued by new industrial entities, the excess spread fluctuated little and showed no obvious trend. As time passed, the market's perception of new industrial entities gradually converged, and the liquidity premium and risk premium at the initial listing stage mostly narrowed significantly [3][26]. - **Overview of major industries of new industrial entities**: - **Building industry**: The industry is currently in a state of low prosperity. In 2024, the construction and completion areas decreased year - on - year. In July 2025, the PMI and its sub - indicators were at a low level. Although the "anti - involution" initiative was put forward, it is difficult to significantly boost the bargaining power of construction enterprises in the short term, and the subsequent marginal improvement needs attention [30][31]. - **Social services**: The number of domestic tourists and tourism revenue have been continuously rising. The main business of social service issuers is mainly related to tourism. With the improvement of the modern tourism system, tourism will play a more prominent role in promoting economic development [35]. - **Real estate**: Housing prices and investment are at a low level. In July 2025, the prices of new and second - hand houses in 70 large and medium - sized cities decreased year - on - year, and real estate development investment also declined. Policy support may be the key variable for the real estate market [37]. 3.3 Investment Recommendations - Focus on new bond - issuing industrial entities in the future, as they often have an excess spread at the initial listing stage, which tends to narrow over time. - Select bonds from industries with relatively good prosperity, such as social services. - Pay attention to bonds issued by urban investment subsidiaries, as their credit risks are relatively controllable [39].

Group 1 - The core viewpoint indicates that real estate stocks in China have seen significant gains, with notable increases in companies such as Jianfa International Group (up 5.24%), China Jinmao (up 4.17%), and others, driven by policy optimizations in major cities since July [1] - Key cities like Beijing, Guangzhou, Nanjing, and Dalian have improved housing fund loan policies, including increasing loan amounts, optimizing withdrawals, and extending repayment periods [1] - The Central Political Bureau meeting on July 30 suggested that future policies in the real estate sector will focus on stabilizing the market, with potential initiatives including "urban renewal" and the renovation of dilapidated urban villages [1] Group 2 - Some market investors are optimistic about the potential for short-term real estate stimulus policies, although the recent Political Bureau meeting did not directly address these policies, leading to a more pessimistic outlook for the industry [2] - The industry is transitioning from a focus on short-term stimulus to exploring new development models, which aligns with the current industry logic amid decreasing risks [2] - The overall assessment of the real estate sector is that it is in a bottoming phase, with decreasing risk-free interest rates and improved risk evaluations contributing to rising market sentiment and stock price opportunities [2]

Group 1 - The core viewpoint indicates that real estate stocks have seen significant gains, with notable increases in companies such as Jianfa International Group (up 5.24%), China Jinmao (up 4.17%), and others, driven by policy optimizations in major cities since July [1] - Key cities like Beijing, Guangzhou, Nanjing, and Dalian have improved housing fund loan policies, including increasing loan amounts, optimizing withdrawals, and extending repayment periods [1] - The Central Political Bureau meeting on July 30 suggested that future policies in the real estate sector will focus on stabilizing the market, with potential demands for urban renewal and the renovation of old urban villages [1] Group 2 - Eastern Securities noted that some investors are optimistic about short-term real estate stimulus policies, but the recent Political Bureau meeting did not directly address these policies, leading to a pessimistic outlook for the industry [2] - The industry is transitioning from short-term stimulus expectations to exploring new development models, which aligns with the current industry logic [2] - The overall assessment of the real estate sector is that it is in a bottoming phase, with decreasing risk-free interest rates and improved risk evaluations contributing to rising market risk appetite and stock price opportunities [2]

Group 1 - The core viewpoint indicates that real estate stocks in China have seen significant gains, with notable increases in companies such as Jianfa International Group (up 5.24%) and China Jinmao (up 4.17%) as of the latest report [1] - Key cities have been optimizing real estate policies since July, including adjustments to public housing loan policies in cities like Beijing, Guangzhou, Nanjing, and Dalian [1] - The Central Political Bureau meeting on July 30 suggested that future policy measures in the real estate sector will focus on stabilizing the market, with potential demand from urban renewal and renovation of old urban villages [1] Group 2 - Some market investors are optimistic about the potential for short-term real estate stimulus policies, although the recent Political Bureau meeting did not directly address these policies, leading to a more pessimistic outlook for the industry [2] - The industry is viewed as being in a bottoming phase, with a decrease in risk-free interest rates and a recovery in risk assessment for the real estate sector, which may lead to upward price movements in real estate stocks [2]