China / Hong Kong China Property Weekly Digest (Issue No. 263) Refer to important disclosures at the end of this report DBS Group Research . Equity 14 Aug 2018 HSI: 27,937 New yuan loans in July exceeded ANALYST expectations Danielle WANG CFA, +852 2820 4915 [email protected] Carol WU +852 2863 8841 [email protected] New yuan loans in July was stronger-than- Ken HE CFA, +86 21 6888 3375 [email protected] expected Jason LAM +852 2971 1773 [email protected] Weekly GFA sold in 32 cities fell 20% w-o-w Inventory (no. of weeks of sales) of 16 cities* China SCE (1966 HK) and Country Garden (2007 HK) saw the highest southbound inflows 100.0 90.0 Prefer Shimao (813 HK) and Evergrande (3333 HK) 80.0 70.0 60.0 New yuan loans in July was considerably stronger-than- 50.0 expected. According to the latest statement from the China 40.0 Banking and Insurance Regulatory Commission (CBIRC), China's 30.0 new yuan loans in July reached Rmb1.45tn, while growth of 20.0 broad M2 money supply hit a 5-month high at 8.5%. Of this, 10.0 0.0 new household loans, largely mortgage loans, was Rmb634.4bn (short-term loans: Rmb176.8bn; medium-long term loans: Jan-11 Jan-17 Jun-13 Apr-18 Nov-15 Mar-12 Rmb457.6bn), accounting for 43.8% of total new loans in July Aug-14 vs 38.4% in June. The figures were considerably stronger than Inventory (no. of weeks) 26 weeks rolling avg expected, in our view, and should lend support to the recently New launches in 10 major cities and sell-through rate dampened market sentiment, as it partially alleviates market concerns regarding the credit environment for home buyers. 20,000 100% 18,000 90% 16,000 80% Weekly GFA sold in 32 cities fell 20% w-o-w. Last week (23 – 14,000 70% 29 Jul), gross floor area (GFA) sold in 32 cities fell 20% w-o-w. 12,000 60% 10,000 50% On a YTD basis, the decline in GFA sold in the 32 cities we track 8,000 40% 6,000 30% stood at 12.6% y-o-y. Inventory level modestly dropped to 47 4,000 20% 2,000 10% weeks. 0 0% China SCE and Country Garden saw the highest percentages of 51W16 12W17 25W17 38W17 51W17 13W18 26W18 southbound inflow. The average percentage of southbound Total units launched (LHS) shareholding in the Chinese property sector remained largely Sell-through rate (RHS) stable at 5.62% last week. China SCE and Country Garden 26w avg recorded the highest percentages of southbound inflows over * Rolling 26 weeks inventory the week. Average short-selling interest in the sector moderated to 14%, with CR Land (1109) and Logan (3380) recording the Weekly sales performance (Aug 6 – Aug 12) highest figures. YT D v s YT D v s w-o-w 2017 2016 Prefer Shimao and Evergrande. The sector is currently trading at Avg weekly GFA sold ↓ 20.2% ↓ 13.5% ↓ 39.8% 6.0x FY18F PE and 4.6x FY19F PE compared to the 2015 trough Inventory (no. of weeks) ↓ 0.7 ↓ 0.1 ↑ 0.5 of 4.5x, and offers average dividend yield of 5.9% and 7.3% for the respective years. Companies with sufficient landbank, ability v s same v s same period 2017 period 2016 to leverage on partnerships, strong year-to-date presales, YTD GFA sold ↓ 12.6% ↓ 39.4% disciplined landbanking strategy, and financing capability will Source: CREIS, Fang.com, DBS Bank (Hong Kong) Limited (“DBS HK”) stand out. As such, we like Shimao, Evergrande, COLI and CR Land. In terms of valuation, Evergrande and Shimao are our top picks. Interim results should serve as a near term catalyst. ed-TH / sa- CS/JY China / Hong Kong China Property Weekly Digest Share price performance Average short selling interest as percentage of trading YTD Share price performance volume (Aug 6 – Aug 10) Zhong An China Vanke Glorious Sector avg: -10% COGO BJ Cap Land 'H' Sector Avearge: 14% Renhe China SCE Kaisa Poly (Hong Kong) China South City SRE Road King Poly HK Yuzhou Properties Lai Fung Vanke Powerlong Sunac China South City BJ Cap Land CIFI Holdings Ying Li Sino-Ocean Times Property SOHO Minmetals Land C Garden Greenland GZ R&F SZI Hopson Dev Small caps BJ North Star 'H' Mid caps Greentown Sino-Ocean Land Shui On Land Yuexiu Property Hopson Glorious Property BJ North Star Greenland HK Shenzhen Inv MSCI China KWG Property Yanlord Central China COLI HSI Index Sunac China Yuzhou China Jinmao Hldgs China SCE China Overseas Minmetals First Sponsor COGO CIFI Shimao Property KWG Yuexiu China Vanke 'H' China Jinmao Evergrande Agile Country Garden Large caps Evergrande Guangzhou R&F Road King Longfor Powerlong Soho China CC Land Longfor Shui On Land CR Land Agile Property Shimao Greentown -80% -60% -40% -20% 0% 20% 40% Logan Property CR Land 0% 5% 10% 15% 20% 25% 30% 35% Daily trading volume (Aug 6 – Aug 10) US$ mn 350 300 250 200 150 100 50 0 SZI CIFI COLI Agile KWG Sunac SOHO Vanke Renhe COGO Yuexiu GZ R&F GZ Shimao Poly HK Poly Yuzhou Hopson Longfor Yanlord Glorious CR Land CR CC Land CC C Garden C Zhong An Zhong Road King Road China SCE China Powerlong Evergrande Greentown Sino-Ocean BJ Cap Land Cap BJ China South… China BJ North Star BJ Shui On Land On Shui China Jinmao China Greenland HK Greenland Source: Bloomberg Finance L.P, HKEx, DBS HK Page 2 China / Hong Kong China Property Weekly Digest Average weekly trading volume US$ mn 700 600 500 400 300 200 100 0 SZI CIFI COLI Agile Kaisa KWG Sunac SOHO Vanke Renhe COGO Yuexiu Ying Li Ying Shimao GZ R&F GZ Poly HK Poly Yuzhou Hopson Longfor Yanlord Glorious CR Land CR C Garden C Zhong An Zhong Road King Road Minmetals China SCE China Powerlong Evergrande Greentown Sino-Ocean BJ CapLand BJ BJ NorthStar BJ Shui On Land On Shui China Jinmao China Greenland HK Greenland China South City South China YTD 2017 2016 Source: Bloomberg Finance L.P, DBS HK Overall southbound shareholding in CCASS w-o-w % changes of shareholding by southbound trading No. of shares (bn) Road King 11,000 Yuzhou Evergrande 10,500 CIFI Greenland HK 10,000 Poly HK 9,500 Shimao CR Land 9,000 China South City Shui On Land 8,500 Powerlong 8,000 Vanke GZ R&F 7,500 Renhe KWG 7,000 Kaisa Logan 6,500 Longfor 6,000 SOHO COLI Sino-Ocean Shenzhen Inv Sunac BJ North Star Agile Hopson COGO Yuexiu China Jinmao Greentown Country Garden China SCE -15% -10% -5% 0% 5% Source: Bloomberg Finance L.P Page 3 China / Hong Kong China Property Weekly Digest Weekly sales performance of major cities Tier I cities Tier I cities: Weekly GFA sales of key cities GFA % change as compared to A v g of Last week previous 4 City (000 sm) w-o-w y -o-y week s A v g 2017 A v g 2016 A v g 2015 A v g 2014 A v g 2013 Beijing 89 -2% 85% 5% -16% -51% -59% -53% -64% Shanghai 265 -27% 5% -28% 1% -37% -39% -16% -23% Shenzhen 86 -5% 69% 6% 28% 6% -33% 11% 2% Guangzhou 81 -59% -32% -48% -65% -70% -61% -49% -60% Tier I total 521 -30% 11% -16% -13% -38% -48% -27% -36% Source: CREIS, DBS HK Tier I cities: Weekly ASP of key cities A SP % change as compared to A v g of Last week prev ious City (Rmb/sm) w-o-w y -o-y 4 week s A v g 2017 A v g 2016 A v g 2015 A v g 2014 A v g 2013 Beijing 37,315 -2% -3% -9% -14% 4% 39% 46% 59% Shanghai 32,462 -24% 26% 5% 23% 22% 40% 72% 74% Shenzhen 54,217 0% -1% 0% 0% 0% 64% 130% 146% Guangzhou n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. Tier I total 41,332 -9% 7% -1% 3% 8% 48% 83% 93% Source: CREIS, DBS HK Tier I cities: YTD avg GFA sales of key cities Tier I cities: Avg ASP of key cities 000 sm Yoy (%) RMB/sm Yoy (%) 10,000 40% 60,000 0% 9,000 30% 50,000 -2% 8,000 20% 7,000 -4% 6,000 10% 40,000 -6% 5,000 0% 30,000 4,000 -10% -8% 3,000 20,000 2,000 -20% -10% 1,000 -30% 10,000 -12% 0 -40% 0 -14% Beijing Beijing Shanghai Shenzhen Shanghai Shenzhen Guangzhou Guangzhou 2018 avg (LHS) 2017 avg (LHS) Yoy (RHS) 2018 avg (LHS) 2017 avg (LHS) Yoy (RHS) Source: Thomson Reuters, DBS HK Source: Thomson Reuters, DBS HK Page 4 China / Hong Kong China Property Weekly Digest Tier II cities Tier II cities: Weekly GFA sales of key cities GFA % change as compared to A v g of Last week prev ious City (000 sm) w-o-w y -o-y 4 week s A v g 2017 A v g 2016 A v g 2015 A v g 2014 A v g 2013 Hangzhou 58 0% -47% -2% -53% -64% -50% -29% -35% Suzhou 131 -34% 20% -3% 16% -24% -43% -17% -16% Changsha 195 -50% 5% -40% -5% -61% -35% -29% -40% Ningbo 86 -73% -39% -51% -39% -37% -15% 4% -7% Wuhan 394 -15% -13% 6% 3% -41% -20% -3% 5% Chengdu 296 -21% 256% -2% 34% 55% 73% 66% 40% Chongqing 895 23% 42% 18% 42% 92% 119% 111% 106% Qingdao 229 -26% -32% -30% -29% -41% -11% 29% -2% Xi'an 138 -38% -89% -20% -54% -61% -50% -39% -41% Nanjing 151 17% 67% -21% 0% -47% -36% -2% -22% Dalian 46 -37% -3% -25% -36% -27% -20% 4% -21% Fuzhou 35 53% 23% 39% -13% -33% -32% -16% -22% Shenyang 366 -27% 0% -20% 19% 25% 40% 50% 13% Nanchang n.a.