Real Estate Stocks Soar! Fed's Rate Cut Confirmed!
On September 19th, the news of the Federal Reserve's significant interest rate cut continued to ferment, leading to a collective surge in real estate stocks in both Hong Kong and Mainland China!
In the Hong Kong stock market, Evergrande Real Estate (02777.HK) saw a substantial rise in its stock price, with an increase of 13.85% by the midday break; Shimao Group (00813.HK) also rose by 13.68%, Sunac China (01918.HK) surged by 9.78%, China Resources Land (01109.HK) increased by 9.33%, C&D International Holding (01908.HK) rose by 8.98%, Vanke Enterprise (02202.HK) increased by 8.72%, and other real estate concept stocks such as Greentown China (03900.HK) also joined this upward trend.
On the Mainland China stock market, real estate stocks also attacked upwards, with Electronic City (600658.SH) achieving three consecutive board hits by the midday break, while China Communications Property (000736.SZ) and Tiandi Source (600665.SH) also recorded limit-up boards, Gemdale Corporation (600383.SH) rose by 9.63%, Zhongzhou Holdings (000042.SZ) increased by 6.41%, and Chongqing Development (000514.SZ) rose by 6.27%.
In terms of news, on September 18th local time, the Federal Reserve announced a significant interest rate cut of 50 basis points and hinted at another 50 basis point cut this year.
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This is undoubtedly a major positive for credit-sensitive industries such as real estate.
Market analysis suggests that after the dollar starts the interest rate cut cycle, capital will flow back, giving China more room for interest rate cuts, and the era of low interest rates is beneficial for the property market.
Huafu Securities also previously stated that the expectation of overseas interest rate cuts is strong, and it may open up the space for domestic interest rates to fall, further releasing housing demand.
Against the backdrop of improved global liquidity and continued relaxation of real estate policies, it is recommended to focus on leading real estate developers such as Greentown China and Yuexiu Property.
Looking at the property market trend, the market continued to recover weakly in August.
According to data from the National Bureau of Statistics, from January to August 2024, the area of new housing starts, the area and sales volume of new houses nationwide, and the funds in place for real estate companies and other indicators all showed a slight narrowing of the year-on-year decline.
Among them, the national real estate development investment decreased by 10.2% year-on-year, the same as the decline from January to July.
The cumulative sales area of commercial housing nationwide decreased by 18.0% year-on-year, the decline narrowed by 0.6 percentage points compared to January to July, and the cumulative sales volume decreased by 23.6% year-on-year, narrowing by 0.7 percentage points compared to January to July.
China Banking Securities stated that the traditional off-season coupled with the weakening of policies in core cities, the absolute volume of commercial housing sales nationwide is at a historically low level, and demand confidence is still insufficient.
Whether the market can continue to repair depends on the pace and strength of the follow-up policies, as well as the improvement of residents' expectations.
Currently, there is a high call for the parity of existing mortgage interest rates and new mortgage interest rates, and the Federal Reserve's interest rate cut has opened up further space for interest rate cuts in China, making the possibility of a decline in existing mortgage interest rates greater.
Recently, the person in charge of the relevant department of the central bank stated that monetary policy will be more flexible, moderate, precise, and effective, increasing the strength of regulation, accelerating the implementation of financial policy measures that have been introduced, and starting to introduce some incremental policy measures to further reduce the financing costs of enterprises and residents' credit costs.
Guojin Securities pointed out that the efforts of monetary policy and the decline of mortgage interest rates have a positive significance for real estate, and it is expected that the decline of incremental and existing mortgage interest rates will be realized.
CITIC Securities also stated that there is no sign of the market bottoming out on its own, but the policy space is still very sufficient.
There is room for efforts in mortgage loan interest rates, public fund loan quotas, individual income tax deductions for mortgage loan interest, the collection of existing housing, and home purchase settlement, etc.
The bank believes that if policies are introduced on the demand side, it is expected to reverse the downward trend of the market.
From an investment perspective, real estate is still at the bottom of historical valuations.
Ping An Securities believes that the mid-term trend opportunity lies in the stabilization of the volume and price of the real estate market, and the mid-term opportunity may be greater than the risk.
In terms of allocation, it is recommended to focus on high-quality real estate companies with lighter historical burdens and optimized inventory structures.
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