Core Viewpoint - The real estate industry is expected to stabilize after a significant downturn lasting five years, with policies aimed at supporting the market likely to reduce the overall decline this year [1] Industry Summary - The real estate sector has experienced a substantial adjustment since the second half of 2021, with notable declines in both new housing starts and transaction volumes [1] - The current adjustment in the real estate market is considered to be significant, but there are signs of recovery, particularly in the second-hand housing market in major cities [1] - The demand for new homes is anticipated to improve as the recovery in the second-hand market translates into increased demand for new housing [1] Company Summary - Longfor Group's CEO, Chen Xuping, indicated that the company is preparing for increased demand by actively managing product inventory [1] - The company has observed a resurgence in sales of high-end new properties located in prime areas, reflecting a shift in market dynamics [1]

Investment Rating - The report maintains a "Positive" rating for the real estate and property management sectors [4][5]. Core Insights - The report draws parallels between Japan and the US, indicating that leading companies' stock prices bottom out before core city housing prices, which in turn precede national housing price bottoms. This pattern suggests that leading real estate companies exhibit significant stock price elasticity [4][6]. - Core cities are expected to lead the recovery in housing prices, driven by factors such as population inflow and improvements in residents' balance sheets. The report anticipates that cities like Shanghai will be at the forefront of this trend [4][5][6]. - The report highlights that the current environment presents attractive investment opportunities, as many quality companies are trading at historical low price-to-book (PB) ratios, making the sector appealing for investment [5][6]. Summary by Sections 1. Japan Crisis Insights - The report reviews Japan's real estate crisis, noting that housing starts, sales, and investments fell by over 50% during the downturn. The stock prices of leading companies began to recover before housing prices did, with significant increases observed from 2003 to 2007 [13][20][24]. 2. US Crisis Insights - Similar patterns were observed in the US, where leading companies' stock prices outperformed housing prices in major cities. The report notes that the stock prices of companies like Horton and Lennar surged significantly during the recovery phase [4][6][20]. 3. China Cycle Insights - The report suggests that the trend of declining household balance sheets in China is nearing an end, with core cities like Shanghai expected to lead the recovery in housing prices. The report emphasizes the importance of population growth, stable rents, and declining interest rates as key factors for this recovery [4][5][6]. 4. Investment Analysis - The report recommends investing in quality real estate companies, commercial real estate, second-hand housing intermediaries, and property management firms, highlighting specific companies such as Jianfa International, Binhai Group, and China Resources Land as potential beneficiaries of the anticipated market recovery [5][6].

Investment Rating - The report indicates a cautious outlook on the real estate market, suggesting that 2026 is a critical year for stabilization after a period of decline [3][12]. Core Insights - In February 2026, the average price of second-hand residential properties in 100 cities decreased by 0.54% month-on-month, with the decline narrowing by 0.31 percentage points compared to the previous month. Year-on-year, the price fell by 8.78% [3][4]. - The average price of new residential properties in February 2026 was 17,107 RMB per square meter, showing a slight month-on-month decrease of 0.04% but a year-on-year increase of 2.37% [3][4]. - The rental market saw a slight decline, with the average rent in 50 cities at 33.96 RMB per square meter per month, down 0.11% month-on-month and 3.79% year-on-year [3][4]. Summary by Sections Second-hand Residential Market - The month-on-month decline in second-hand residential prices across first, second, and third/fourth-tier cities was 0.42%, 0.57%, and 0.54%, respectively, with year-on-year declines of 7.85%, 9.44%, and 8.51% [8]. - A total of 5 cities experienced price increases, while 95 cities saw declines [8]. New Residential Market - In February, first-tier cities saw a 0.07% month-on-month decrease in new residential prices, while second-tier cities experienced a 0.08% increase. Year-on-year, first-tier cities rose by 6.51% and second-tier cities by 1.70% [8]. - 15 cities reported price increases, while 84 cities saw declines, with one city remaining stable [8]. Rental Market - The rental market showed a month-on-month decline of 0.11% in February, with a year-on-year decrease of 3.79% [3][4]. - The report highlights that short-term rental demand increased in some cities due to the Spring Festival, impacting rental prices [3][4]. Policy and Market Outlook - The report emphasizes that February's performance is crucial for the real estate market's trajectory in 2026, with March expected to be a key observation point for market trends [4][12]. - The government is expected to continue focusing on policies aimed at controlling supply and improving housing quality, with a gradual approach to real estate development [10][12].

Group 1 - The report highlights the recovery opportunities in the consumer building materials sector, driven by the stabilization of the real estate market and the emergence of sub-industry advantages [2][3] - The funding aspect shows an increasing proportion of active equity funds' holdings in the building materials sector, with noticeable net inflows into building materials ETFs since late January 2026 [10][11] - The fundamental aspect indicates that the consumer building materials sub-industry is showing alpha advantages due to an optimized competitive landscape, smoother price transmission, channel transformation, and dual recovery of performance and valuation [14][42] Group 2 - The competitive landscape in the consumer building materials industry has improved, with the market concentration in the waterproof materials sector expected to increase, as indicated by the CR5 rising from 55% in 2023 to 60% in the first half of 2025 [17][19] - The report notes that major companies in the waterproof materials sector have begun to raise prices in response to rising raw material costs, indicating a shift away from intense competition [19][20] - The transformation of business models is highlighted, with companies shifting focus from large B clients to small B and C end customers, which helps mitigate risks associated with large client concentration [20][25] Group 3 - The report anticipates a turning point in the revenue and net profit growth rates for the consumer building materials index, with current PB valuations below the 50th percentile since 2020, suggesting potential for both performance improvement and valuation recovery [42][44]

Core Viewpoint - The current focus should be on breaking the low-price cycle and addressing consumption deficiencies through significant reforms and adjustments [1][4]. Group 1: Consumption and Economic Reforms - Consumption should not solely rely on government subsidies, which may have short-term effects; long-term solutions require improvements in the social security system and stabilization of the real estate market [3][6]. - Enhancing the social security system is crucial to alleviate residents' concerns and encourage spending, thereby unlocking consumption potential [3][6]. - The real estate market has not yet stabilized, with historical data suggesting that economies typically take seven years to reach a stable state after significant fluctuations; China is currently in its fifth year of this cycle [3][6]. Group 2: Real Estate Market Strategies - Strategies to stabilize the real estate market include inventory reduction, maintaining key stakeholders, and implementing mortgage subsidies to lower the cost of mortgages for residents [3][6]. - Evidence from international experiences indicates that when mortgage rates are significantly lower than rental yields, it can improve public expectations for home purchases, fostering a positive cycle in the real estate market [3][6]. - Recommendations for the 2026 real estate policy include the implementation of mortgage subsidies to enhance affordability and stimulate market activity [3][6]. Group 3: Social Security Enhancements - A proposal to significantly increase social security subsidies for farmers and migrant workers from approximately 200 yuan per month to 1,000 yuan by 2030 aims to address consumer concerns and boost spending [3][6].

Core Viewpoint - The current focus is on breaking the low-price cycle and addressing insufficient consumption through significant reforms, particularly in social security and the real estate market [1][3]. Group 1: Consumption and Social Security - Consumption should not solely rely on government subsidies; while they may have short-term effects, long-term solutions require a robust social security system to alleviate concerns and encourage spending [1][3]. - There is a proposal to significantly increase social security subsidies for farmers and migrant workers from over 200 yuan per month to 1,000 yuan by 2030, aiming to resolve consumer concerns [2][4]. Group 2: Real Estate Market - The stabilization of the real estate market is crucial; based on international experience, it typically takes about seven years for a real estate market to stabilize after significant fluctuations, and China is currently in its fifth year [1][3]. - There is a need to address the inventory issue in major cities, which is close to two years' worth of sales volume [1][3]. - Recommendations include inventory reduction, support for main entities, and particularly the implementation of mortgage subsidies to lower the cost of mortgages and narrow the gap with rental yields [1][3][4].

Report Industry Investment Rating - Not provided in the given content Core Viewpoints - The short - term stock index may fluctuate, but the trend remains unchanged, and it is expected to attack the previous high. The shock digestion since November has entered the end, and from December to January of the next year, it is likely to enter the window period of cross - year layout. The market is expected to show a shock climb again. The mid - term view of being bullish on the stock index remains unchanged. It is recommended to layout and go long on the spring market of the stock index. In terms of operation, hold mid - term long positions and continue to add positions opportunistically; hold call options. [13] Summary by Directory 1. Weekly Views and Strategies Fundamental Views - Last week, the broader market continued to rebound and continuously stood above the 60 - day moving average. The four major indexes all rose, with the small - and medium - cap indexes leading the gains. Most of the style indexes rose, with the growth and cyclical style indexes leading the gains, and only the consumer style index falling. Most of the Shenwan industries rose, with the non - ferrous metals, military, electrical equipment, and electronics sectors leading the gains, while the tourism, banking, coal, and food and beverage sectors led the losses. [8][18][21] - In November 2025, the manufacturing PMI was 49.2%, up 0.2 percentage points from the previous month; the non - manufacturing PMI was 49.5%, down 0.7 percentage points from the previous month. The supply and demand sides of the manufacturing PMI rebounded slightly in November, with the new export orders rebounding by a relatively large 1.7%, which is related to the mitigation of Sino - US tariffs; the ex - factory price and the purchase price of raw materials rebounded again after two months of decline. [8][36] - The growth rate of medium - and long - term credit has been falling continuously for 30 months to 5.89% as of November 2025, and continues to decline. [8][47] - The Politburo set the tone for the real estate market to stop falling and stabilize, and boost the capital market; the State Council issued the new Nine - Article Guidelines to strongly support investor returns; the central bank created two new types of monetary policy tools; the implementation plan for promoting the entry of medium - and long - term funds into the market was officially released, which is expected to add 800 billion yuan of long - term funds to the A - share market annually. [8][55] - The A - share performance showed signs of stabilization in the first quarter, declined in the second quarter, and continued to stabilize and rebound in the third quarter. The performance of the four major indexes rebounded again in the third quarter of 2025. [8][73][77] - The Shanghai Composite Index's valuation is 16.5341, with an upper - limit value of 15.66, and it is at the 87.09th percentile since 2010, at a relatively high level since 2010. However, as performance rises, the valuation will decline. The ChiNext valuation is at a relatively low level. [10][90][92] - In terms of margin trading, the net inflow in 2024 was 274.8 billion yuan; as of December 25, 2025, the net inflow in 2025 was 674.3 billion yuan, and the net inflow in the first five trading days was 45.9 billion yuan. The scale of private securities investment funds increased by 1.7946 trillion yuan this year, and the total scale is currently 7.0076 trillion yuan. The newly registered scale this year is 386 billion yuan. The market value of A - shares held by insurance funds increased by 552.4 billion yuan in the third quarter of 2025, with a month - on - month increase of 18.00%. As of September 30, 2025, the newly established share of stock - type funds was 323.3 billion, and that of hybrid funds was 103.6 billion. The net inflow of index funds in 2025 was 104.9 billion yuan, while the net outflow of active equity funds was 444.9 billion yuan. From April 7 to December 19, 2025, the ETF scale increased by 176.3 billion yuan, and last week it increased by 47.3 billion yuan. As of December 19, the net inflow of ETF funds this year was 79.3 billion yuan. [11][97][101] Strategy Views and Outlook - The broader market fluctuated and rose for eight consecutive days last Friday, with a dive during the session and the trading volume increased to more than 2 trillion yuan, remaining above the 60 - day moving average. The market sentiment declined, and there may be short - term fluctuations, but the trend remains unchanged, and it is expected to attack the previous high. It is recommended to layout and go long on the spring market of the stock index. In terms of operation, hold mid - term long positions and continue to add positions opportunistically; hold call options. [13] 2. Index Industry Trend Review - Last week, the broader market continued to rebound and continuously stood above the 60 - day moving average. The four major indexes all rose, with the small - and medium - cap indexes leading the gains. Most of the style indexes rose, with the growth and cyclical style indexes leading the gains, and only the consumer style index falling. Most of the Shenwan industries rose, with the non - ferrous metals, military, electrical equipment, and electronics sectors leading the gains, while the tourism, banking, coal, and food and beverage sectors led the losses. [8][18][21] 3. Main Contract and Basis Trend - The four major indexes continued to rebound. In terms of the basis, it started from the quarterly main contract and is at a relatively high level. In terms of the arbitrage of each main contract, IC/IF and IC/IH fluctuated and stabilized, IH/IF stabilized; IM/IF and IM/IH fluctuated weakly; IM/IC fluctuated and declined. [25][30] 4. Policy and Economy Economy - In November 2025, the manufacturing PMI was 49.2%, up 0.2 percentage points from the previous month; the non - manufacturing PMI was 49.5%, down 0.7 percentage points from the previous month. The supply and demand sides of the manufacturing PMI rebounded slightly in November, with the new export orders rebounding by a relatively large 1.7%, which is related to the mitigation of Sino - US tariffs; the ex - factory price and the purchase price of raw materials rebounded again after two months of decline. [36] - Generally, PPI leads the inventory cycle. PPI bottomed out and rebounded in June 2023, weakened after two months, and the decline has been narrowing continuously since March 2024. The decline of PPI has been narrowing again since November 2025. In October, the operating revenue of industrial enterprises fell to 1.8%, the inventory continued to rise to 3.7%, demand declined, and there was passive inventory replenishment. [39] - China's social financing scale in November was 2488.5 billion yuan, an increase of 152.8 billion yuan compared with the same period last year. Among them, new RMB loans were 405.3 billion yuan, a decrease of 117 billion yuan compared with the same period last year, mainly due to a decrease of 206.3 billion yuan in household loans. Government bonds were 1204.1 billion yuan, a decrease of 106 billion yuan compared with the same period last year. [42] - The growth rate of medium - and long - term credit has been falling continuously for 30 months to 5.89% as of November 2025, and continues to decline. [47] Policy - New Nine - Article Guidelines: It aims to improve the overall quality of listed companies from the source and promote listed companies to pay more attention to rewarding shareholders. [51] - Implementation Plan for Promoting the Entry of Medium - and Long - Term Funds into the Market: It includes measures such as increasing the actual investment ratio, extending the assessment period, and forming a joint force to implement incremental policies, which is expected to bring a large amount of long - term funds into the A - share market. [54] - The Politburo set the tone for the real estate market to stop falling and stabilize, and boost the capital market, including measures to boost the capital market, promote the entry of medium - and long - term funds, support mergers and acquisitions of listed companies, and promote the stable development of the real estate market. [55] - The central bank created new monetary policy tools, including a swap facility for securities, funds, and insurance companies and a stock repurchase and increase re - loan, and carried out MLF operations and reverse repurchase operations, and adjusted relevant interest rates. [58] - A large - scale debt - resolution measure was announced, which will directly increase 10 trillion yuan of local debt - resolution funds and significantly reduce the local debt - resolution pressure. [59] - Accelerate the construction of first - class investment banks and investment institutions to better promote the high - quality development of the capital market, including implementing differentiated supervision for different types of securities companies. [60] - The 14th Five - Year Plan: It is a crucial five - year period with multiple strategic goals to be achieved. It involves aspects such as the international trade pattern, Sino - US relations, supply - chain reconstruction, and domestic economic development. [63] - The US mid - term elections: The policy environment in the next year will be more favorable for risk assets. The mid - term election schedule and expected fiscal support are also mentioned. [64][66] 5. Revenue and Net Profit of Each Index - The A - share performance showed signs of stabilization in the first quarter, declined in the second quarter, and continued to stabilize and rebound in the third quarter. The performance of the four major indexes rebounded again in the third quarter of 2025. [73][77] 6. Valuation - The Shanghai Composite Index's valuation is 16.5341, with an upper - limit value of 15.66, and it is at the 87.09th percentile since 2010, at a relatively high level since 2010. However, as performance rises, the valuation will decline. The ChiNext valuation is at a relatively low level. [10][90][92] 7. Federal Reserve Interest Rate - Not provided in the given content 8. Capital Flow - In terms of margin trading, the net inflow in 2024 was 274.8 billion yuan; as of December 25, 2025, the net inflow in 2025 was 674.3 billion yuan, and the net inflow in the first five trading days was 45.9 billion yuan. [97] - The scale of private securities investment funds increased by 1.7946 trillion yuan this year, and the total scale is currently 7.0076 trillion yuan. The newly registered scale this year is 386 billion yuan. [101] - The market value of A - shares held by insurance funds increased by 552.4 billion yuan in the third quarter of 2025, with a month - on - month increase of 18.00%, and the market value of A - shares held by insurance funds increased by 1.193 trillion yuan in the first three quarters of 2025, with an increase of 758.4 billion yuan after deducting the scale growth. [103][104] - The market value of the national team increased by 4 billion in the third quarter, with little change, while the CSI 300 index rose by 17.9%. The mid - and long - term A - share market value increased by nearly 90 billion in the third quarter, and the market value of A - shares held by mid - and long - term A - share investment entities increased by 1.8145 trillion in the first three quarters of 2025. [106][108] - From April 7 to December 19, 2025, the ETF scale increased by 204 billion yuan; last week, the ETF scale continued to increase by 27.7 billion yuan. As of December 26, the net inflow of ETF funds this year was 107 billion yuan. [111] - As of September 30, 2025, the newly established share of stock - type funds was 323.3 billion, and that of hybrid funds was 103.6 billion. [117] - In October 2025, the deposits of non - bank financial institutions increased by 1.8574 trillion yuan again, and the total deposits of non - bank financial institutions increased by 6.6688 trillion yuan this year. Overall, funds are flowing from the banking system to non - bank channels such as the capital market and wealth management products. [121] - As of last weekend, the IPO financing in 2023 was 356.5 billion yuan; in 2024, it was 67.3 billion yuan; in 2025, it was 125.3 billion yuan. [129] - Last week, the net reduction of major shareholders in the secondary market was 14.2 billion yuan, at a relatively high level. [134] - The unlocking volume in the first half of 2026 is relatively small. [138] 9. Technical Analysis - The daily - line trend charts of the Shanghai 50 Index, CSI 300 Index, CSI 500 Index, and CSI 1000 Index are provided, showing the price trends of these indexes from December 26, 2024, to December 23, 2025. [142][144][146][148]

Core Viewpoint - The new regulations for the Shenzhen Housing Provident Fund aim to better meet the diverse housing consumption needs of employees by adding multiple withdrawal scenarios and relaxing withdrawal conditions, effective from December 15, 2025 [1] Group 1: Home Purchase Withdrawal - The new regulations allow employees and their family members to withdraw housing provident fund for down payments when purchasing homes in Shenzhen, with specific limits based on the number of properties owned [1] - Employees can withdraw the full balance of their housing provident fund if they own one property, and 60% of the balance if they own two properties, with the total not exceeding the unpaid down payment [1] - Employees can only choose one withdrawal method if they meet both home purchase and down payment withdrawal conditions [1] - Funds withdrawn for down payments can still be counted towards the loan eligibility for ordinary housing provident fund loans, allowing for simultaneous withdrawal and loan application [1] Group 2: Tax Payment Withdrawal - The new regulations introduce a withdrawal option for housing provident fund to pay taxes related to the purchase of the first or second home, with the withdrawal amount not exceeding the actual tax paid [2] - Employees can apply for simultaneous withdrawal and loan application at the counter when processing down payment withdrawals [2] Group 3: Rental Withdrawal - The new regulations establish a phased adjustment mechanism for rental withdrawal limits, increasing support for families with multiple children and those renting subsidized housing [3] - The standard monthly withdrawal limit remains at 65% of the current month's contribution, but can be increased to 80% for non-homeowning employees from November 1, 2025, for two years [3] - The regulations expand support for rental withdrawals, allowing families with two or more children to withdraw up to 100% of their monthly contributions or actual rent without the previous requirement of having at least one minor child [3] Group 4: Support for Housing Renovation - The new regulations enhance support for employees involved in old housing renovation projects, introducing three new withdrawal options for self-funded renovations, elevator upgrades, and increased area for relocation [4] - The ongoing adjustments in housing provident fund policies across various cities aim to optimize usage scenarios and improve withdrawal conditions, with expectations for further policy adjustments to support real estate stabilization [4]

Economic Growth Outlook - The GDP growth target for China in 2026 is expected to remain around 5%[4] - The contribution of final consumption expenditure to GDP growth is projected to be 53.5% in 2025, up from 44.5% in 2024[26] - The anticipated growth rate of social retail sales is around 4% in 2026, with final consumption expenditure growth expected to exceed 5%[51] Export Performance - China's export share is projected to continue its upward trend, with an expected growth rate of 4-5% in 2026[21] - As of July 2025, China's export share reached 15.1%, up from 14.9% in 2024, indicating strong global competitiveness[14] Investment Stability - Real estate investment is expected to stabilize, with a projected decline of around 10.2% in 2026, a significant improvement from previous years[55] - Infrastructure investment growth is anticipated to rebound significantly in 2026, supported by new policy tools and long-term special bonds[74] Inflation and Price Trends - CPI is expected to rise to around 0.6% in 2026, driven by food prices, while PPI is projected to recover from a decline of -2.8% in 2025[95][116] - The core CPI is expected to maintain a higher level of around 0.8-1% in 2026, reflecting improved consumer confidence and spending[110] Fiscal Policy Outlook - The narrow deficit ratio is projected to increase to 4-4.3% in 2026, with a special bond issuance of approximately 1.5 trillion yuan[127] - New local special bonds are expected to be in the range of 5-5.5 trillion yuan, marking an increase from 2025[128]

Group 1 - Recent adjustments in housing provident fund policies across multiple cities are seen as a continuous release of favorable policies for the real estate market [1][2] - Zhengzhou has launched an online application channel for housing provident fund personal housing loans, significantly shortening the loan application cycle [1] - In Henan Province, cities like Luoyang and Zhumadian have increased the maximum loan limits for housing provident fund personal loans by 10%, with Luoyang's maximum loan for single-income families rising to 770,000 yuan and dual-income families to 935,000 yuan [1] Group 2 - Since October, over 30 policies have been introduced across various regions, with more than 16 related to housing provident funds, focusing on increasing loan limits, optimizing withdrawals, and extending repayment periods [2] - In Chongqing, new measures have been implemented to optimize the withdrawal of provident funds for purchasing existing homes, including relaxing conditions for full payment purchases [2] - Interviews with homebuyers in Shenzhen indicate a preference for combining provident fund and commercial loans, with hopes for increased loan limits and direct withdrawals for down payments [2] Group 3 - Experts suggest that the strong local attributes of the housing provident fund and its low-interest rates cater well to local demand, particularly from first-time buyers and those upgrading their homes [3] - The real estate market is expected to see new policies aimed at adjusting the use of provident funds, particularly for urban renewal and new real estate models, as part of long-term stabilization efforts [3] - The current market situation requires a multi-faceted approach to break the negative cycle in the real estate market, with gradual policy relaxations being insufficient on their own [3]