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.

Thematic (Sector/Industry)

Last week, we had the opportunity to speak with policy advisors regarding the central government’s thoughts and policy planning regarding the housing market and credit policies, entering the second half of the year.   We learned that the Chinese authorities have become increasingly concerned about the housing market bubble ballooning and have mandated stricter implementation of administrative and monetary tightening policies in the past few months.  The consensus among the decision makers is that without reining in the speculative activities in the housing market both by the home buyers and developers, the stability of the economy and social stability will be greatly endangered.  Stabilizing the housing and financial market had been prioritized and elevated as a national security issue as early as December 2016. Nevertheless, pushing down the policy decision to implementation at the local levels takes a few months.  Starting in Q1 with the top SOE commercial banks -Bank of China (BOC), the China Construction Bank (CCB), the Agricultural Bank of China (ABC), and the Industrial and Commercial Bank of China (ICBC) all commercial banks, large and small, have all been strictly supervised in lending to developers and home buyers.  Specially, the authorities mandated that the net mortgage lending amount to consumers cannot grow sequentially for any bank and that the lending to developers must decelerate to curb the rising land prices and consequent housing prices.

Last week, we had the opportunity to speak with policy advisors regarding the central government’s thoughts and policy planning regarding the housing market and credit policies, entering the second half of the year.   We learned that the Chinese authorities have become increasingly concerned about the housing market bubble ballooning and have mandated stricter implementation of administrative and monetary tightening policies in the past few months.  The consensus among the decision makers is that without reining in the speculative activities in the housing market both by the home buyers and developers, the stability of the economy and social stability will be greatly endangered.  Stabilizing the housing and financial market had been prioritized and elevated as a national security issue as early as December 2016. Nevertheless, pushing down the policy decision to implementation at the local levels takes a few months.  Starting in Q1 with the top SOE commercial banks -Bank of China (BOC), the China Construction Bank (CCB), the Agricultural Bank of China (ABC), and the Industrial and Commercial Bank of China (ICBC) all commercial banks, large and small, have all been strictly supervised in lending to developers and home buyers.  Specially, the authorities mandated that the net mortgage lending amount to consumers cannot grow sequentially for any bank and that the lending to developers must decelerate to curb the rising land prices and consequent housing prices.

Tightening Policies Curb Speculative Home Buyers in H2 2017

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

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Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

The Hong Kong government announced a new ad valorem stamp duty, or AVD, late on Nov. 4. Effective Nov. 5, except for first-time homebuyers who are Hong Kong residents, homebuyers are subjected to a new AVD of 15%. Thus, Hong Kong residents who are not first-time homebuyers are subject to an AVD of 15%, replacing a previous AVD scale ranging from 1.5% to 8.5%. Nonresidents are subject to the new AVD of 15% in addition to an existing Buyer’s Stamp Duty, or BSD, of 15%. First-time homebuyers who are Hong Kong residents are subject to an AVD ranging from 0% to 4.25% based on the existing scale, unchanged from before.We believe <a href="https://www.smartkarma.com/entities/111" target="_blank" data-smartkarma-citation="entities:111:1">Sun Hung Kai Properties (16 HK)</a>, or SHKP, is going to be most affected, given its large exposure to residential properties as well as its status as a proxy for the sector. We believe <a href="https://www.smartkarma.com/entities/22650" target="_blank" data-smartkarma-citation="entities:22650:1">Cheung Kong Property Holding (1113 HK)</a>, or CKP, should be less affected, as it has aggressively sold down its residential inventories, while being very selective in land acquisitions in recent years. For both <a href="https://www.smartkarma.com/entities/376" target="_blank" data-smartkarma-citation="entities:376:1">Henderson Land Development (12 HK)</a> and <a href="https://www.smartkarma.com/entities/3320" target="_blank" data-smartkarma-citation="entities:3320:1">Kerry Properties Ltd (683 HK)</a>, the impact on our fair value estimates is expected to be minor.Analyst: Phillip Zhong

The Hong Kong government announced a new ad valorem stamp duty, or AVD, late on Nov. 4. Effective Nov. 5, except for first-time homebuyers who are Hong Kong residents, homebuyers are subjected to a new AVD of 15%. Thus, Hong Kong residents who are not first-time homebuyers are subject to an AVD of 15%, replacing a previous AVD scale ranging from 1.5% to 8.5%. Nonresidents are subject to the new AVD of 15% in addition to an existing Buyer’s Stamp Duty, or BSD, of 15%. First-time homebuyers who are Hong Kong residents are subject to an AVD ranging from 0% to 4.25% based on the existing scale, unchanged from before.We believe Sun Hung Kai Properties (16 HK), or SHKP, is going to be most affected, given its large exposure to residential properties as well as its status as a proxy for the sector. We believe Cheung Kong Property Holding (1113 HK), or CKP, should be less affected, as it has aggressively sold down its residential inventories, while being very selective in land acquisitions in recent years. For both Henderson Land Development (12 HK) and Kerry Properties Ltd (683 HK), the impact on our fair value estimates is expected to be minor.Analyst: Phillip Zhong

New Stamp Duty Negative on Transaction Volume in the NearTerm

Hong Kong

Vanke Property (Overseas) Ltd., through its subsidiaries, invests in, develops, and manages properties.  The Company also provides warehousing services.

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Vanke Property Overseas (1036 HK)

Tightening Policies Curb Speculative Home Buyers in H2 2017

Last week, we had the opportunity to speak with policy advisors regarding the central government’s thoughts and policy planning regarding the...

JL Warren Capital

New Stamp Duty Negative on Transaction Volume in the NearTerm

The Hong Kong government announced a new ad valorem stamp duty, or AVD, late on Nov. 4. Effective Nov. 5, except for first-time homebuyers who are...

Morningstar, Inc.

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)