Event: on January 17, the central bank announced that it would carry out 700 billion yuan medium-term lending facility (MLF) operation and 100 billion yuan open market reverse repurchase operation on that day. The bid winning interest rates of MLF and open market reverse repurchase operations decreased by 10 basis points. On January 18, the State Council Information Office held a press conference. Liu Guoqiang, vice president of the central bank, said: at present, the economy is facing triple pressure. Stability itself is the biggest advance. Before the downward pressure of the economy is fundamentally relieved, progress should serve stability. Policies that are not conducive to stability will not be issued, and more policies that are conducive to stability will be issued to promote stability.
The central bank made a positive statement and put forward three policies to stabilize the economy. On January 18, the State Information Office held a press conference, Liu Guoqiang, vice governor of the central bank, said that the economic stabilization policy will be strengthened from three aspects: “First, we should make sufficient efforts to expand the monetary policy toolbox to maintain the stability of the total amount and avoid credit collapse; second, we should make precise efforts to make it broad and subtle. The financial sector should not only welcome customers, but also take the initiative to find projects, make effective additions and optimize the economic structure according to the requirements of the new development concept; third, we should make forward-looking operations, Walk in front of the market curve and respond to the general concerns of the market in a timely manner without delay. ” At the same time, the central bank recently encouraged high-quality real estate enterprises to merge and acquire projects of out of danger real estate enterprises. We believe that this reflects the central government’s attention to stabilizing the economy. As an important part of stabilizing the economy, real estate is expected to continue to be repaired in the follow-up policies.
After the reduction of reserve requirements and interest rates, the mortgage interest rate was comprehensively reduced to a high probability event. On January 17, the central bank announced that the seven-day reverse repo rate was reduced from 2.2% to 2.1%, and the one-year MLF rate was reduced from 2.95% to 2.85%. This is the first time to reduce the policy interest rate since the one-year MLF interest rate was lowered in April 2020. Since April 2020, the 1-year and 5-year LPR has been maintained at 3.85% and 4.65%, and the 1-year LPR has not been reduced by 5bp until December last year. It is expected that the 1-year and 5-year LPR will be reduced by 5-10bp this month. The traditional policy combination of reducing reserve requirements and interest rates has been preliminarily achieved, which helps real estate enterprises reduce capital costs on the one hand; On the other hand, the mortgage interest rate is in the downward channel. According to the data of the shell Research Institute, in December 2021, the loan interest rates of the first and second homes in 103 mainstream cities fell 5bp month on month to 5.64% and 5.91%, but in absolute terms, the mortgage interest rate is still at a historically high point and there is still room for decline.
From the historical data, the recovery of commercial housing sales data is usually ushered in after the reduction of reserve requirements and interest rates. Based on the analysis of the nodes of interest rate and reserve reduction and the sales amount and area of commercial housing in China since 2000, it is found that there were four rounds of interest rate and reserve reduction in the past, namely, September December 2008, November 2011 July 2012, November 2014 October 2015 and September 2019 April 2020. After the previous interest rate and reserve requirement cuts, the year-on-year data of commercial housing sales have rebounded significantly, with the lowest rebounding to 59.8% and the highest rebounding to 166.8% (see the appendix for the figure). At present, except that the failure to implement the pilot rules of real estate tax may have an impact on people’s expectations, the real estate policies are marginal positive, and the recovery of future sales data can be expected.
The fundamentals are still at the bottom, and it is expected to see the relaxation of local policies related to the demand side in the next stage. According to the data of the Bureau of statistics, the year-on-year decline in national commercial housing sales and investment in real estate development expanded in December. House prices in 70 large and medium-sized cities continued to decline month on month, and the fundamentals are still in the downward channel. In addition to the reduction of reserve requirements and interest rates, the demand side policies are gradually liberalized. For example, Beihai has reduced the down payment ratio of provident fund loans for second homes, and the review time of provident fund loans in Beijing has been reduced to three working days. Jinhua, Nantong, Hai’an, Wuhu, Zhuhai, Baoding, Kunming and other cities have given house purchase subsidies (mainly talent subsidies and new citizens’ house purchase subsidies). At present, the policies mainly focus on the third and fourth tier cities and provident fund related policies, and the purchase and loan restrictions in hot cities have not been mentioned. We expect that in the next stage, local governments in more cities will launch policies to stimulate house purchase demand, which is conducive to the recovery of the sales side of the real estate market.
Investment suggestion: the policy is favorable and the direction is clear, and the real estate development sector is rated as “overweight”. We believe that since October last year, the central government has made a clear policy shift and continued to increase its efforts. Recently, it has continuously voiced “maintaining the stable development of the real estate market; supporting reasonable housing demand; meeting the reasonable financing demand of the real estate market”. Policy recovery is expected to accelerate the arrival of the bottom of fundamentals. The current favorable policies have not reached the peak. It is expected that the follow-up policies will continue to be favorable, and the real estate enterprises, especially the state-owned central enterprises, with good credit qualification, sufficient liquidity and sufficient soil reserves will benefit more. It is suggested to pay attention to real estate enterprises, including A-Shares Poly Developments And Holdings Group Co.Ltd(600048) , China Merchants Shekou Industrial Zone Holdings Co.Ltd(001979) , Gemdale Corporation(600383) , China Vanke Co.Ltd(000002) , Hangzhou Binjiang Real Estate Group Co.Ltd(002244) , Huafa Industrial Co.Ltd.Zhuhai(600325) , Seazen Holdings Co.Ltd(601155) ; H-share China overseas development, green city China, China Resources Land, Longhu group, China Jinmao, Xuhui holding group, China Overseas Hongyang.
Risk tips: the impact of the epidemic exceeded expectations, sales exceeded expectations, the strength of real estate tax policy exceeded expectations, and the credit default of real estate enterprises and its impact spread risk
