Chinese real estate stocks are soaring despite property market fears

Firms like Sunac, Evergrande among top performers

Apr.April 18, 2017 04:30 PM
A view of the skyline of Pudongs Lujiazui Financial District in Shanghai (credit: Getty Images) and Evergrande’s Hui Ka Yan

From TRD New York: Chinese real estate stocks are racing ahead of their U.S. counterparts, but analysts are split over whether the rally can continue.

Chinese firms accounted for nine of the 10 best performing stocks in the Bloomberg World Real Estate Index so far this year. Firms like China Evergrande Group — which is the country’s largest homebuilder by sales and is battling for control of the country’s second largest builder, Vanke — and Sunac China saw their stock rise more than 70 percent.

Still these firms face a tougher environment now that several major Chinese cities have imposed restrictions on home purchases in a bid to cool the property market.

“Investors will be more selective in buying the stocks this year,” BNP analyst Wee Liat Lee told Bloomberg. “Large developers will gain market share from the smaller players. You need to be a very big developer with diversified exposure across different cities in China to thrive amid tougher curbs.” Debt is another issue: Both Sunac and Evergrande are highly leveraged.

Other analysts argue that even if the market slows, the continued flow of money into Hong Kong’s stock market could still drive up valuations. “Many overseas funds argued that they’re not comfortable with these aggressive firms,” Citigroup analyst Oscar Choi told Bloomberg. “But with Chinese investors rising as a new source of purchasing power, these bears don’t have too much say.”

The Chinese government won’t introduce a property tax this year, despite the belief that it would help curtail the country’s soaring home prices. Dalian Wanda Group CEO Wang Jianlin warned last September that China is now “facing the biggest bubble in history.” [Bloomberg] Konrad Putzier

Related Articles

Interest rate drops spur loan requests from multifamily borrowers (Credit: iStock)

Multifamily owners rush to refinance their mortgages

Institutional investment in Los Angeles is lagging

LA is one of the trickiest cities for institutional investors to understand. Here’s why

Best of TRD 2019 promo

Coming soon: The Real Deal’s Best of 2019

2201 Rosecrans Ave in El Segundo

Continental snags $55M refi on El Segundo office portfolio

From left: Gavin Newsom and David Chiu (Credit: Getty Images and iStock)

Will rent control dent the multifamily market? Lenders, investors weigh in

East LA Community Corporation President Isela Gracian, CIT Bank President Robert Rubino and the two projects

East LA Community Corp. lands $55M in loans for affordable housing projects

Acres Capital CEO Mark Fogel with a rendering of project

Chateau Group scores $44M bridge loan to build Marriott-branded hotel in Arcadia

Colony Capital's Thomas Barrack

Tom Barrack’s Colony Capital snags $1.7B refi on healthcare properties