China's inaction deepens peril for struggling property stocks
A gauge of developers' shares notched its biggest weekly drop in four months after a key meeting on Tuesday failed to yield any concrete measures to revive the industry.
Property sales are likely to remain weak in the third quarter, with better-than-expected economic growth data undermining the case for stimulus in the near term, according to Morgan Stanley.
A four-year slump in China's property sector is showing few signs of easing after a decline in home prices accelerated in June, and major developers reported lackluster earnings for the first half of the year.
That has left investors pinning their hopes on government support to spark a turnaround, with speculation about an aid package fueling the biggest one-day jump in developer shares in five months earlier in July.
'I haven't touched property stocks since 2014 as all the existing housing demand had already been met,' said Sun Jianbo, president of asset manager China Vision Capital. 'Policies can make the real estate slump much milder, but won't give it a chance to recover.'
A NEWSLETTER FOR YOU
Tuesday, 12 pm Property Insights
Get an exclusive analysis of real estate and property news in Singapore and beyond.
Sign Up
Sign Up
The Bloomberg Intelligence gauge of developers' shares has fallen nearly 9 per cent this year to underperform the Hang Seng China Enterprises Index's 23 per cent gain.
The real estate index jumped 8.5 per cent on July 10, its biggest one-day advance since February, amid speculation that authorities would roll out supportive measures at the Central Urban Work Conference.
But Chinese President Xi Jinping refrained from announcing aggressive stimulus at the event, and instead advocated a more measured approach to urban planning and upgrades.
'Modest policies release won't help much,' said Shujin Chen, head of China financial and property research at Jefferies Hong Kong. 'You'll see some market speculations or rumour that may lead to a temporary stock rally, but later find they're just mostly noises.'
Given such dampened expectations, many in the market are pivoting away from the sector altogether.
Six of 20 brokers who cover China Vanke, one of the nation's largest builders by contracted sales, have stopped updating research reports on the firm, according to data compiled by Bloomberg. The Shenzhen-based company said earlier this month its loss for the first half of 2025 may reach US$1.67 billion.
Meanwhile, Poly Developments and Holdings Group reported a 63 per cent drop in preliminary net income for the first half due to market fluctuations and decreasing profitability of carried-over projects.
Shanghai-based real estate firm Greenland Holdings posted a preliminary net loss of 3 billion yuan (S$536.8 million) to 3.5 billion yuan for the period. The firms are among those that have seen multi-year lows in analyst coverage with the latter having none, data compiled by Bloomberg showed.
Developers are seeking ways to boost liquidity via asset sales, an extension in bank loans and debt restructuring. The regulator has introduced a requirement for state-owned developers to avoid defaulting on publicly issued debt, but the overall sentiment remains bearish.
'Fundamentally, it's not a sector worth holding,' said Kenny Wen, head of investment strategy at KGI Asia. 'Property sector now has a different, much less important role in China's economy from what it was a decade ago.'
But for the bold, there are still pockets of opportunities.
JPMorgan Chase & Co. tags the sector as a tactical buy amid growing hopes for further policy support in the coming months. Its fundamental top picks are China Resources Land, China Resources Mixc Lifestyle Services and China Overseas Property Holdings, analyst Karl Chan wrote in a note. The shares of the firms are up at least 8 per cent this year in Hong Kong.
Morgan Stanley recommends that investors stay defensive and stick with state-owned enterprises with good visibility, analysts Stephen Cheung and Cara Zhu wrote in a note.
High-dividend-yield plays such as C&D International Investment Group and Greentown Management Holdings are among its top picks. C&D's shares are up 26 per cent this year while Greentown has declined 13 per cent.
Left with little hope for a broad revival, some investors are rotating out of property and into sectors that offer better earnings upside and stronger policy tailwinds.
For Yang Junxuan, a fund manager at Shanghai Junniu Private Fund Management, the property market is 'more influenced by the whole economic backdrop, which is still weak. Compared with property stocks, we're now more inclined to buy military and AI stocks.' BLOOMBERG
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
a minute ago
- CNA
China's retail split: LV's luxe ship vs a phantom cafe
It has been a month since Louis Vuitton opened its audacious flagship store at one end of Shanghai's premier shopping street. Despite losing some of its novelty factor, 'the Louis' continues to draw in the crowds. But the LV phenomenon masks a mixed picture for Shanghai's shopping malls. CNA's Tan Yew Guan dissects the retail split in the Chinese metropolis.
CNA
a minute ago
- CNA
Commentary: EU-China ties will shape strategic room for Southeast Asia
SINGAPORE: European leaders met Chinese President Xi Jinping and Premier Li Qiang in Beijing on Thursday (July 24) at the EU-China summit, marking 50 years of diplomatic ties. In the era of Trump 2.0, China and the EU could have been a perfect match – at least in theory. They have a significant economic relationship and a mutual commitment to the multilateral trading system. According to 2024 data, they are each other's second-biggest trading partners, with bilateral trade exceeding US$760 billion. In April, Beijing and Brussels agreed that United States President Donald Trump's tariffs hurt international commerce, and committed to resolving their differences to 'jointly safeguard the normal functioning of global trade'. While these circumstances create a conducive setting for alignment, underlying frictions in security and trade had impeded summit preparations and strained their ties. In June, Brussels refused to hold a flagship economic meeting that usually serves a key role in summit preparations. Furthermore, China shortened the summit from two days to one, removing the Friday business meeting from the agenda. Against this backdrop, expectations of the summit were already low. The atmosphere at the meetings was reportedly tense. Mr Xi argued that the EU and China are at a 'critical juncture in history' and had to 'make the right strategic choices' to advance international stability. EU Commission President Ursula von der Leyen noted that relations have reached an 'inflection point' and need 'real solutions' to advance. How both sides manage these issues and the trajectory of their relationship after the summit present both challenges and opportunities for Southeast Asia. TENSIONS OVER UKRAINE AND SOUTH CHINA SEA In the realm of security, one key challenge of EU-China ties is their divergent perspective on the conflict in Ukraine. While China officially denies that it aids Russia's military‑industrial base, the EU considers China a 'key enabler' of Moscow's war effort in Ukraine. Multiple rounds of EU sanctions on Russia have included Chinese entities for their purported support to the Russian war machine. The latest package blacklisted Chinese banks for the first time, with two regional banks allegedly helping Russia to bypass economic sanctions. At the summit, European Council President Antonio Costa called on China to leverage its influence on Russia to help end the war. At the same time, some of the EU's activities in Asia trigger security concerns in China. In June, EU High Representative for Foreign Affairs and Security Policy Kaja Kallas visited the Philippines – a South China Sea disputant – and Brussels agreed to establish a dialogue on security and defense with Manila. During the visit, Ms Kallas reiterated the EU's commitment to 'addressing common concerns in the South China Sea'. Subsequently, the Chinese embassy to the Philippines told the European Union to refrain from stirring trouble in the South China Sea, and advised Manila against dragging external forces into the dispute. DISAGREEMENTS OVER TRADE On the trade front, one of the EU's chief concerns is the Chinese government's subsidies that lead to the inflow of cheap products into Europe. This has led the EU to put defensive trade measures in place that subsequently triggered retaliation from Beijing, in a counterproductive spiral. Last October, the EU imposed definitive anti-subsidy duties on battery electric vehicles imported to the bloc from China. In addition, the EU imposed provisional anti-dumping duties on hardwood plywood imports from China, and is currently conducting an anti‑dumping investigation into tire imports. Beijing also imposed trade measures on Brussels. It unleashed anti-dumping duties on brandy imported to China from the EU, while exempting some of the biggest producers. Moreover, China has an ongoing anti-subsidy probe into dairy products and an anti‑dumping investigation into pork imports from the EU. At the summit, Brussels called on Beijing to end these measures, which remains a sticking point in their relationship. Apart from long-standing concerns about product dumping, the EU is also worried about China's restrictions on rare earth exports, given its high dependence on those materials. Beijing's export controls since April have delayed rare earth supplies to Europe and disrupted industrial production across the continent. Even though Beijing fast-tracked related administrative processes, the EU emphasised the negative impact of restrictions at the summit and is pushing for a closure of export controls altogether – something that China seems unwilling to do. The summit confirmed that what Beijing regards as interdependence and interconnectivity is a source of geoeconomic vulnerability in the eyes of Brussels. EU-CHINA TIES HAVE SIGNIFICANCE FOR SOUTHEAST ASIA This top-level EU-China meeting and the subsequent development of their relationship carry significant implications for Southeast Asian nations, which were among the hardest hit by Mr Trump's initial tariff salvo until recent deals. A protracted stalemate could lead China to view the EU's increasing courtship of Southeast Asia with heightened suspicion, making it more difficult for the region to deepen ties with Europe without straining relations with Beijing. Further restrictions on European imports from China could exacerbate the already significant flow of cheap Chinese goods to the region. In addition, the EU could increase scrutiny on its imports from Southeast Asia, as Chinese businesses could reroute their Europe-bound imports to traverse through the region to dodge tariffs. If Beijing and Brussels manage to reduce key trade tensions at a later point, pressure would ease on the global trading system, already under strain from Washington's unilateral and protectionist policies. As US tariffs push Southeast Asian nations to scale back links with China, strengthening trade relations with the EU – ASEAN's third-largest trading partner – could provide an alternative source of growth and stability. Ultimately, the trajectory of EU-China relations after the summit will not only shape their economic and security ties but also influence Southeast Asia's strategic room for manoeuvre in a rapidly shifting global landscape.
CNA
an hour ago
- CNA
Hong Kong-based digital asset platform OSL Group completes $300 million equity financing
HONG KONG/SHANGHAI :Hong Kong-based digital asset platform OSL Group said on Friday it had completed $300 million of equity financing, the latest sign of feverish investor interest in cryptocurrencies. The deal, which the company said was the biggest publicly disclosed equity raise in Asia's digital asset space, comes days before Hong Kong's stablecoin bill takes effect on August 1, and could add fuel to a rally in shares related to virtual assets. OSL shares have surged 120 per cent so far this year. Hong Kong's de facto central bank on Wednesday cautioned against growing frothiness of the market around stablecoins, saying the hype had led to "excessive exuberance". Proceeds from the share sale would be used to support global initiatives including stablecoin development, licensing efforts, and the build-out of a digital payment network, OSL said in a statement. "The funding will accelerate our global build-out - particularly in regulated stablecoin infrastructure and compliant payment rails," said Ivan Wong, chief financial officer of OSL Group. In a statement to the Hong Kong bourse, OSL said the share placing price is HK$14.90 per share, representing a 15.3 per cent discount to its closing price on Thursday, and a 16.2 per cent discount to the average closing price in the last five trading days. Shares of OSL opened down more than 10 per cent in Hong Kong on Friday, as the market reacted to the dilution impact and the discounted placing price. Since transforming last year into a company fully dedicated to digital assets, OSL has secured an exchange licence in Australia and completed acquisitions in Japan and Europe. OSL has also said it would step up investment in the so-called Real-World-Assets business, converting traditional assets into digital tokens.
