Market Weakness: China's home market continued to weaken in 4Q25, with sales down 11.2% YoY, GFA sold decreasing by 8.1%, and average selling prices falling by 3.3%, surpassing previous forecasts by Fitch Ratings.

Inventory Trends: Despite a decline in completed new-home inventory for nine months, the inventory was only about 1% lower at the end of November 2025 compared to the end of 2024, indicating that destocking is lagging behind the drop in sales.

Fitch Ratings Adjustments: Fitch revised the outlooks on CHINA JINMAO and CAPITAL DEV from Negative to Stable due to improved sales performance and business clarity, while downgrading CHINA VANKE to 'RD' after it defaulted on bond payments.

Future Price Pressures: Elevated inventories are expected to continue exerting pressure on home prices throughout 2026, as the market struggles with high inventory levels amidst declining sales.

US and China Stock Market Performance: The DJIA in the US reached a record high, while the Shanghai Composite Index in China hit a ten-year high, with the Hong Kong bourse also experiencing significant gains.

Tech Stocks Movement: Major tech stocks like TENCENT, JD-SW, and BIDU-SW saw increases of 1.3-1.7%, while BABA-W dipped by 1.3%. Other tech companies related to autonomous driving surged after Nvidia's platform release.

Financial Sector Gains: Overseas bank stocks, including HSBC and Standard Chartered, rose by 3.1% and 1.9%, respectively, while Chinese insurers and brokers also posted substantial gains.

Commodity and Resource Stocks Surge: Gold miners and resource stocks experienced significant increases, with ZHAOJIN MINING and JIANGXI COPPER rising by 7.3% and 5.5%, respectively, amid elevated commodity prices.

Investor Sentiment Boost: JP Morgan's report indicates that recent commentary in the CCP's "Qiushi" magazine has raised investor hopes for a shift in real estate policies, suggesting a more comprehensive approach may be forthcoming this year.

Market Outlook: Despite ongoing declines in housing prices and sales, JP Morgan forecasts continued downturns in the real estate sector for 2026 unless significant policy changes are implemented, with potential upside risks if stronger support is introduced.

Policy Timing: The report emphasizes that while the commentary is promising, it does not guarantee a policy shift, with key decision-making events like the "Two Sessions" in March and the Politburo meeting in April being critical for future developments.

Top Stock Picks: JP Morgan identifies several stocks as top picks for potential rebounds, including CHINA RES LAND, CHINA RES MIXC, and CHINA JINMAO, with LONGFOR GROUP seen as offering the best risk-reward scenario in a policy-driven recovery.

Tax Rate Reduction: China's Ministry of Finance has lowered the value-added tax rate for residential properties held for less than two years from 5% to 3%, as reported by JPMorgan.

Limited Impact on Market: JPMorgan believes the new policy will have a minimal effect, primarily benefiting sellers without improving buyer expectations or stabilizing home prices.

Market Outlook: The brokerage predicts that the real estate market will continue to be sluggish unless the government takes stronger actions to stabilize home prices.

Investment Recommendations: JPMorgan's top stock picks in the sector include CHINA RES LAND, CHINA RES MIXC, and CHINA JINMAO, while advising against investing in CHINA VANKE.

Market Weakness: China's home market continued to decline in 4Q25, with sales down 11.2% YoY, GFA sold decreasing 8.1%, and average selling prices falling 3.3%, surpassing Fitch's forecasts for the year.

Economic Factors: The downturn is attributed to a sluggish economy, labor market pressures, and expectations of further price cuts, with policy support providing only temporary relief.

Rating Adjustments: Fitch revised the Outlooks on the 'BBB-' ratings of CHINA JINMAO and Beijing Capital Development Holding from Negative to Stable due to improved sales performance and business clarity.

Downgrade of CHINA VANKE: Fitch downgraded CHINA VANKE's Long-Term IDRs to 'RD' due to repayment risks associated with its medium-term notes.