Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

Thematic (Sector/Industry)

This time could be DIFFERENT!For years, investors have shorted Chinese property companies due to the excess capacity. Excess capacity is still there but combined with the sky-high level of indebtedness, the government initiative to cool the overheated property market, banks' over-reliant on Wealth Management Products sales to boost income could; they all could be the much-needed catalysts to re-start the hard-landing investment theme. Among others, property developer stocks and rural bank stocks are most vulnerable to the increase in interest rates as the former are highly indebted, yet provide high yielding corporate bonds that become an important component to the booming wealth management product (WMP) in China. Rural bank stocks have been pushing wealth management product aggressively to boost their income, neglecting the real risk of having increased and concentrated exposure to domestic corporate bond market which is susceptible to interest rate increase.

This time could be DIFFERENT!For years, investors have shorted Chinese property companies due to the excess capacity. Excess capacity is still there but combined with the sky-high level of indebtedness, the government initiative to cool the overheated property market, banks' over-reliant on Wealth Management Products sales to boost income could; they all could be the much-needed catalysts to re-start the hard-landing investment theme. Among others, property developer stocks and rural bank stocks are most vulnerable to the increase in interest rates as the former are highly indebted, yet provide high yielding corporate bonds that become an important component to the booming wealth management product (WMP) in China. Rural bank stocks have been pushing wealth management product aggressively to boost their income, neglecting the real risk of having increased and concentrated exposure to domestic corporate bond market which is susceptible to interest rate increase. 

High Leverage Property Developer and Rural Bank Stocks in China: Smells Like Trouble?

Founder-CEO & Chief Analyst, Real Estate Foresight

Robert Ciemniak

Founder-CEO & Chief Analyst

Real Estate Foresight

Since 2012, REF has been helping investors with market research, project due diligence, and strategy development. This has ranged from detailed assessments and estimates on distressed developers' project portfolios to market due diligence on specific projects to macro-level questions linked to demand for commodities. The unique combination of the housing markets and developer data from data partner China Index Academy in Beijing, primary research, and technology-powered alternative data collection from public sources result in a valuable content set used in REF analytics and reports.

Predictive Analytics for China Property

In this note, we look in greater detail into the dynamics of new home sales volumes in China in gross floor area terms with the latest April and some May data, zooming in on the growing difference between the performance of larger Tier-1 and Tier-2 cities and the smaller cities, including 'cities without data'.

In this note, we look in greater detail into the dynamics of new home sales volumes in China in gross floor area terms with the latest April and some May data, zooming in on the growing difference between the performance of larger Tier-1 and Tier-2 cities and the smaller cities, including 'cities without data'.  

China Property: New Homes Sales Volumes Dynamics (April/May) - Big Vs Smaller Cities

New house price indices data from China's National Bureau of Statistics (NBS) for April for 70 major cities and calculations of the aggregate figures show a further gradual deceleration in price growth overall on a year-on-year basis from +11.3% in March to +10.7% in April, though the month-on-month growth actually picked up further from +0.6% to +0.7%. The mix of cities that drive this growth pattern has been changing though.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/026/451/original/Screen%20Shot%202017-05-22%20at%2000.51.38.png?1495385540" class="editor-image img-responsive" data-smartkarma-image-id="26451"></figure>The biggest month-on-month changes were recorded in Bengbu (+2.2%)…

New house price indices data from China's National Bureau of Statistics (NBS) for April for 70 major cities and calculations of the aggregate figures show a further gradual deceleration in price growth overall on a year-on-year basis from +11.3% in March to +10.7% in April, though the month-on-month growth actually picked up further from +0.6% to +0.7%. The mix of cities that drive this growth pattern has been changing though.The biggest month-on-month changes were recorded in Bengbu (+2.2%)…

China Property: April House Price Growth Slower Y/Y, Stronger M/M, Fewer Outliers

Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

There is an apparent divergence in sales performance between the key cities (for which we provide weekly tracking data) and the under-the-radar cities in China for which data are hard to access.  While our data continued to point to plummeting sales especially in T1 and T2 cities, the NBS (the National Bureau of Statistics) data pointed to robust growth of 17% in gross floor area (GFA) sold during Q1 this year.  Note that while we only track 57 cities out of 300+ cities in China, the population in those cities accounts for ~65% of total urban residents in China.  We believe that the small cities are simply the replay of the large cities in that most homes are purchased as investments with the anticipation of sustained price appreciation, regardless of all economic cycles. In fact, in the lower-tier cities where regulatory oversight is questionable, we spotted <a href="http://finance.qq.com/a/20170311/022231.htm" target="_blank">cases</a> of leverage for residential property purchase exceeding 25 times equity.

There is an apparent divergence in sales performance between the key cities (for which we provide weekly tracking data) and the under-the-radar cities in China for which data are hard to access.  While our data continued to point to plummeting sales especially in T1 and T2 cities, the NBS (the National Bureau of Statistics) data pointed to robust growth of 17% in gross floor area (GFA) sold during Q1 this year.  Note that while we only track 57 cities out of 300+ cities in China, the population in those cities accounts for ~65% of total urban residents in China.  We believe that the small cities are simply the replay of the large cities in that most homes are purchased as investments with the anticipation of sustained price appreciation, regardless of all economic cycles. In fact, in the lower-tier cities where regulatory oversight is questionable, we spotted cases of leverage for residential property purchase exceeding 25 times equity.

Global Asset Allocation, Politics & Governance, Ecstrat

John-Paul Smith

Global Asset Allocation, Politics & Governance

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
​
More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

Cross Asset Strategy

In this insight, we highlight some recent developments on the policy front in China before commenting on the tactical indicators. The main current issues for investors to consider are:<ol>
<li>is the very visible pick-up in the economy and corporate sector likely to prove self-sustaining;</li>
<li>are the authorities serious about policy tightening and/or economic reform;</li>
<li>what action will the US administration take over both the bilateral trade imbalance and also over North Korea, which has emerged as the second…</li>
</ol>

In this insight, we highlight some recent developments on the policy front in China before commenting on the tactical indicators. The main current issues for investors to consider are:
is the very visible pick-up in the economy and corporate sector likely to prove self-sustaining;
are the authorities serious about policy tightening and/or economic reform;
what action will the US administration take over both the bilateral trade imbalance and also over North Korea, which has emerged as the second…


China: Can Beijing Maintain the Policy Balancing Act Through 2017? (Part 2 of 8)

China

China Vanke is a prominent real estate developer primarily focused on residential property sales, and is among the top three in China. The company has expanded its business to include investment properties such as commercial retail complexes, long-term leasing apartments, and logistical assets, alongside property management services. Founded in 1984, China Vanke is headquartered in Shenzhen, Guangdong, China.

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China Vanke (2202 HK)

High Leverage Property Developer and Rural Bank Stocks in China: Smells Like Trouble?

This time could be DIFFERENT!For years, investors have shorted Chinese property companies due to the excess capacity. Excess capacity is still...

Henry Soediarko

China Property: New Homes Sales Volumes Dynamics (April/May) - Big Vs Smaller Cities

In this note, we look in greater detail into the dynamics of new home sales volumes in China in gross floor area terms with the latest April and...

Robert Ciemniak

China Property: April House Price Growth Slower Y/Y, Stronger M/M, Fewer Outliers

New house price indices data from China's National Bureau of Statistics (NBS) for April for 70 major cities and calculations of the aggregate...

Robert Ciemniak

Chinese Housing Market Update

There is an apparent divergence in sales performance between the key cities (for which we provide weekly tracking data) and the under-the-radar...

JL Warren Capital

China: Can Beijing Maintain the Policy Balancing Act Through 2017? (Part 2 of 8)

In this insight, we highlight some recent developments on the policy front in China before commenting on the tactical indicators. The main current...

John-Paul Smith

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