On December 3, 2021, Evergrande announced that it might not be able to fulfill its guarantee liability. On the same day, the central bank, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission and the Ministry of housing and urban rural development all made statements on this; The people's Government of Guangdong Province agreed to send a working group to Evergrande Real Estate Group Co., Ltd.
The Evergrande incident in China is fundamentally different from the Lehman incident in the United States in 2008
Evergrande incident is not the so-called "Chinese version of Lehman". There are great differences between the two: 1. Behind Lehman is American residents plus leverage, while behind Evergrande is Chinese real estate enterprises plus leverage. 2. After the "Lehman moment", house prices collapsed, resulting in the rapid depreciation of collateral, followed by the U.S. subprime mortgage crisis; The possibility of a cliff like decline in house prices in China is very low. 3. China has mature experience in handling debt problems of large enterprises, including state takeover, business split, etc. 4. Chinese banks and other financial institutions are more responsive to regulation than the United States and are easier to block risk infection.
This round of real estate regulation is essentially different from the past
This round of real estate regulation is essentially different from the past. There are two starting points: 1. Deleveraging of the real estate industry. The main focus of this round of real estate regulation is "three red lines + proportion of housing loans", and the policy is "prudent management system of real estate finance", Logic and MPa 2016-2017 (macro Prudential assessment system) similarly, the latter is aimed at the leverage of the banking system, while the former is aimed at the leverage of real estate enterprises. 2. The requirements of common prosperity. Establishing a long-term real estate regulation mechanism and curbing the unreasonable rise of real estate through the prudent management system of real estate finance, centralized land supply and the introduction of real estate tax are important requirements for realizing common prosperity. House price income Too high income ratio seriously restricts consumption and fertility, which are important contents of "internal circulation".
The "policy bottom" of real estate has been realized, but some radical private real estate enterprises still need to be cleared
From the perspective of real estate policy, "policy bottom" has indeed appeared. In September, the central bank and China Banking and Insurance Regulatory Commission held a symposium on real estate finance, and then issued several positive signals related to real estate, indicating that the policy has reached the bottom.
However, the emergence of "policy bottom" does not represent a policy shift, let alone real estate stimulus. For private real estate enterprises, what should be considered is the adaptation and survival under the current rules, rather than relying on policies to "rescue the market".
In the past, some radical private real estate enterprises relied too much on "house price rise + leverage", and the probability of these two conditions will not be established in the future. Therefore, we believe that some radical private real estate enterprises still need to be further cleared.
Real estate is not necessarily a great drag on the economy. Leading real estate stocks are better than real estate bonds
We expect that the drag of real estate on GDP is not necessarily great: 1. "Guaranteed housing" has become a consistent behavior of real estate enterprises, and the construction may accelerate rather than slow down. 2. Land acquisition is the worst link in real estate. However, land acquisition is not included in GDP statistics. 3. If real estate investment declines greatly, affordable housing and public rental housing may accelerate.
As mentioned earlier, some radical private real estate enterprises still need to be cleared. To judge whether the real estate debt is wrongly killed, it needs very professional and accurate data, research and calculation. It can not be considered that the risk of real estate debt has decreased significantly just because of the "policy bottom".
For leading real estate stocks, we are more optimistic: 1. The valuation of leading real estate stocks has been historically low, and there is a lot of room for rebound. 2. "Policy bottom" is more effective for leading real estate enterprises, which is different from some radical private real estate enterprises. 3. The bond issuance and M & A encouraged by the current policy are the benefits of leading real estate enterprises. 4. Although it is difficult for house prices to rise in the future, there is a good logic of purchasing high-quality assets at a low price and improving concentration.
Risk tip: policy changes exceed expectations.
