Core view
This week’s market review. In the 50th week, the real estate sector index was weaker than the CSI 300 index and the gem index. The relative return of the real estate sector compared with the CSI 300 index was – 0.8%. The CSI 300 index closed at 5055.12, with a weekly increase of 3.1%; The gem index closed at 3466.80, with a weekly increase of – 0.3%; The real estate sector index closed at 3332.75, with a weekly increase of 2.3%.
Industry highlights this week. The central bank decided to cut the reserve requirement by 0.5% on December 15 and release 1.2 trillion yuan of funds. The central economic work conference was held in Beijing, focusing on incremental statements such as “meeting demand” and “virtuous cycle”, and the counter cyclical regulation window has been opened. Compared with the central economic work conference in the past few years, the statement of this conference maintained the positioning of “housing without speculation”, but added the statements of “meeting the reasonable housing needs of buyers” and “promoting a virtuous cycle of the real estate industry”, which continued the tone set by the Politburo meeting on December 6. Although “housing without speculation” is the basic logic of China’s current and even future real estate policy for a long time, in the small cycle, considering that there are still a large number of rigid needs and improved housing needs have not been met, we believe that under the framework of “housing without speculation”, the current specific policy still has some room for adjustment. At present, under the background of the rapid decline of industry sales and the “run” of real estate enterprises’ cash flow by all creditors, it is very important to break the negative cycle of the industry and establish a virtuous cycle. More specifically, the core of realizing the “virtuous circle” is to support the demand for just needed and improved housing, and to recover the rapid decline in sales is the basis for rebuilding the confidence of the whole society in real estate enterprises. The meeting proposed to “support the commercial housing market to better meet the reasonable housing needs of buyers”, Combined with the statement of “focusing on meeting the mortgage needs of the first house and improved housing” made by the China Banking and Insurance Regulatory Commission a few days ago, we believe that the demand side policy is already in the toolbox. In addition, the relevant policies of “improved housing” have not been mentioned since 2017, which needs special attention.
The sales of new houses this week decreased compared with last week, and the sales of second-hand houses were flat compared with last week. In the 50th week, the sales of new houses in 29 major cities was 29000 units, a decrease of 23.3% compared with the 49th week; The sales of second-hand houses in 11 major cities were 8000 units, unchanged from the 49th week. The inventory increased compared with last week, and the inventory sales increased compared with last week. As of the 50th week, the inventory in 15 major cities was 1236000 sets, an increase of 1000 sets compared with the 49th week; The stock to sales ratio was 12.6 months, an increase of 0.3 months compared with the 49th week.
Investment proposal and investment object
This week, the central bank officially lowered the reserve requirement in an all-round way. At the central economic work conference, the statements related to real estate were warm. At the critical point where the industry is facing the risk of hard landing, we believe that there will be some room for policy loosening to hedge against the negative impact. In the downward trend, the central enterprises and state-owned enterprises with financing advantages have stronger integration ability. Poly Real Estate (600048, buy) and China Vanke Co.Ltd(000002) (00000 2, buy) are recommended; Second tier leaders with flexible performance are recommended Gemdale Corporation(600383) (600383, buy) and Xuhui holding group (00884, buy). The property management industry is involved in the development business in the short term, but it still has growth in the long term. Recommend Xuhui Yongsheng service (01995, buy), Country Garden Service (06098, buy), poly property (06049, buy), rongchuang service (01516, buy). The business management service has high growth, underestimated value and good business model. It is optimistic about Xingsheng business (06668, buy) and Baolong business (09909, buy). It is recommended to pay attention to China Resources Vientiane life (01209, not rated).
Risk statement
The impact of the epidemic led to significantly lower sales than expected.
The severity of policy regulation is higher than expected. Interest rates have risen significantly.
