Daiwa Lowers CHINA VANKE (02202.HK) Rating to Underperform and Reduces Target Price to $4.7

BofA Securities maintains a non-consensus positive view on the Chinese real estate industry due to expectations of more proactive policy-making by authorities, which could create contrarian investment opportunities amid low investor positioning and mounting pressure. The firm favors companies with strong execution capabilities and anticipates that certain firms will benefit from potential consumer stimulus measures. However, it has lowered earnings forecasts and target prices for many developers due to downbeat fundamental prospects, leading to an Underperform rating for some companies.

The analyst rating from JPMorgan is influenced by the potential for the Chinese government to provide mortgage subsidies, which could amount to RMB400 billion. However, the report emphasizes that while this policy direction is possible, it may not be sufficient to reverse the current situation in the property market unless buyer confidence in stable housing prices is established. The report also notes that the RMB400 billion figure represents only about 5% of annual new residential sales and highlights the historical inaccuracy of market rumors, which have only a 40% accuracy rate. Additionally, the mixed reactions in stock price movements—where CHINA VANKE saw a significant surge while major state-owned enterprises experienced minimal increases—suggest that investor enthusiasm regarding the policy is limited. Consequently, JPMorgan maintains its top picks in the sector, indicating a cautious outlook despite the potential for policy-driven rallies.

The analyst rating for CHINA OVERSEAS (00688.HK) is a Buy, as reaffirmed by BofA Securities despite the company's soft 3Q25 results. The reasons for this rating include: 1. Anticipated Earnings Rebound: BofA Securities forecasts a rebound in underlying 4Q25 earnings, suggesting that the current weak performance may be temporary. 2. Young Land Bank: The company has the youngest land bank in the industry, with only 27% of its land purchased before 2022. This positions it to potentially recover with better margins compared to peers as the market improves. 3. Valuation Appeal: The stock is considered appealing at a valuation of 8x 2027E P/E, making it one of the top picks in the sector. 4. Project Completion Timing: The weak earnings in 3Q25 are attributed to project completion timing, indicating that future results may improve as projects are completed. Overall, while there are challenges such as weakening property prices and potential inventory impairment, the outlook for recovery and the company's strategic position support the Buy rating.

The analyst rating for CHINA OVERSEAS (00688.HK) is reiterated as Neutral by Nomura due to the company's flagging results for 1H25, which showed a decline in revenue and core net profit. Despite a potential recovery in gross profit margin (GPM) in the mid-term, the broker prefers CHINA RES LAND (01109.HK) over CHINA OVERSEAS. Nomura has kept its sales and earnings forecasts unchanged while raising the target price from HKD12.2 to HKD14.6, indicating a cautious outlook despite some positive signs for future GPM improvement.