Core view
Pay attention to incremental expressions such as “meet demand” and “virtuous cycle”. Considering the positive requirements of economic stability in 2022, the counter cyclical regulation window of the real estate industry is expected to open. ① 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. ② 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 CIRC a few days ago, we believe that the demand side policy may be in the toolbox. In addition, the relevant policies of “improved housing” have not been mentioned since 2017, which needs special attention. ③ This meeting put forward more positive requirements for economic stability in 2022, which is specifically expressed as “next year’s economic work should be stable and seek progress in stability, all regions and departments should shoulder the responsibility of stabilizing the macro economy, all parties should actively launch policies conducive to economic stability, and the policy force should be appropriately advanced”. We believe that restoring the “virtuous circle” of real estate is of great importance to the “steady growth” of national economic work next year, and the counter cyclical regulation window of the real estate industry is expected to open.
At the “2021-2022 annual meeting of China’s economy” held on December 11, Han Wenxiu, deputy director of the office of the central financial and Economic Commission, Ning Jizhe, deputy director of the national development and Reform Commission and director of the National Bureau of statistics, also interpreted the central economic work conference. “Real estate is a pillar industry, and housing is the consumption of residents”, “the real estate industry has a large scale, a long chain and a wide range of implications. It occupies a high share in the national economy in the whole society’s fixed asset investment, local fiscal revenue and the total loans of financial institutions, and has an important systematic impact on economic and financial stability and risk prevention”, It also further confirms that the counter cyclical regulation window of the real estate industry is expected to open.
Investment proposal and investment object
Since the outbreak of Evergrande’s debt crisis this year, the real estate industry as a whole has been greatly impacted. At present, the core problem of the industry has changed from credit “run” to a sharp decline in sales. We expect that the decline in sales will continue to Q1 next year. In combination with the recent frequent statements of senior management, it is expected that in the next period of time, depending on the fundamentals of the industry, all regulatory departments and local governments will strengthen the policy support due to urban policies. However, considering that there is still a time lag between the end of the policy and the end of the fundamentals, the company’s risk events may still occur sporadically. We are optimistic about the stable portfolio with high safety. We recommend Vanke A (00000 2, buy), Poly Developments And Holdings Group Co.Ltd(600048) (600048, buy), Gemdale Corporation(600383) (600383, buy), Longhu group (00960, buy), Xuhui holding group (00884, buy). We suggest paying attention to China Resources land (01109, not rated); At the same time, it is suggested to pay attention to rongchuang China (01918, not rated), Seazen Holdings Co.Ltd(601155) (601155, not rated), Jinke Property Group Co.Ltd(000656) (000656, not rated) with large fundamental elasticity.
Risk statement
The strength of the real estate support policy was less than expected, the credit deterioration rate of major companies was faster than expected, and the decline rate of real estate sales was faster than expected
