HSBC Research Updates Ratings and Target Prices for Chinese Developers (Table)

The analyst rating from Morgan Stanley is influenced by several factors: 1. Market Sentiment: The significant decline in sales and the acceleration of second-hand home price declines in major cities in mainland China are contributing to a negative market sentiment. The large volume of second-hand property listings is expected to continue suppressing this sentiment, impacting property sales and prices for the remainder of the year. 2. Cautious View on the Market: Morgan Stanley maintains a cautious outlook on the overall physical property market due to the cooling of short-term stimulus expectations and weak sales. 3. Opportunities in Quality SOEs: Despite the cautious view, the report suggests that the recent industry pullback may present a good entry opportunity for quality state-owned enterprises (SOEs), which are seen as long-term market consolidators with attractive dividend yields. 4. Prudence on Private Enterprises: The broker expresses a more prudent stance on private enterprises, citing concerns over their aging and depleting land reserves, which may limit their sales and profitability in the long term. 5. Optimism for Specific Companies: Morgan Stanley is optimistic about specific companies like CHINA RES LAND and C&D INTL GROUP, viewing them as potential outperformers due to their strong market positions and dividend yields. They also see potential for companies like CHINA OVERSEAS, CHINA JINMAO, and YUEXIU PROPERTY to outperform peers in the upcoming quarter based on potentially stronger sales performance. Overall, the rating reflects a cautious but selective optimism, focusing on quality SOEs while being wary of the broader market challenges.

The analyst rating from Morgan Stanley is influenced by several factors: 1. Market Sentiment: The significant decline in sales and the acceleration of second-hand home price declines in major cities in mainland China are contributing to a negative market sentiment. The large volume of second-hand property listings is expected to continue suppressing this sentiment, impacting property sales and prices for the remainder of the year. 2. Cautious View on the Overall Market: Morgan Stanley maintains a cautious outlook on the overall physical property market due to the cooling of short-term stimulus expectations and weak sales. 3. Opportunities for Quality SOEs: Despite the cautious view, the report suggests that the current industry pullback may present a good entry opportunity for quality state-owned enterprises (SOEs), which are seen as long-term market consolidators with attractive dividend yields. 4. Prudence on Private Enterprises: The broker expresses a more prudent stance on private enterprises, citing concerns over their aging and depleting land reserves, which may limit their sales and profitability in the long term. 5. Optimism for Specific Companies: Morgan Stanley is optimistic about specific companies like CHINA RES LAND and C&D INTL GROUP, viewing them as potential outperformers due to their strong market positions and dividend yields. They also see potential for companies like CHINA OVERSEAS, CHINA JINMAO, and YUEXIU PROPERTY to outperform peers in the upcoming quarter based on potentially stronger sales performance. Overall, the rating reflects a cautious but selective optimism, focusing on quality SOEs while being wary of the broader market conditions affecting private enterprises.

The analyst rating from HSBC Global Research is based on an optimistic outlook for the profit recovery of major Chinese property developers by 2026. The report highlights an expected increase in normalized profit calculations and improved margins for these developers. HSBC specifically favors stocks like CHINA RES LAND, C&D INTL GROUP, and SEAZEN, all rated as "Buy," due to their anticipated earnings growth above pre-crisis levels. The positive sentiment is further supported by the expectation of increased market share for leading developers and a growing interest in the C-REIT market, which could enhance investor engagement in the sector.