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Business Times
2 days ago
- Business
- Business Times
China's inaction deepens peril for struggling property stocks
INVESTORS are growing skeptical that Chinese developer stocks will stage a rebound this year, as Beijing's reluctance to unleash sweeping stimulus deepens pessimism about the sector. 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
Mint
2 days ago
- Business
- Mint
China's Inaction Deepens Peril for Struggling Property Stocks
Investors are growing skeptical that Chinese developer stocks will stage a rebound this year, as Beijing's reluctance to unleash sweeping stimulus deepens pessimism about the sector. 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.' The Bloomberg Intelligence gauge of developers' shares has fallen nearly 9% this year to underperform the Hang Seng China Enterprises Index's 23% gain. The real estate index jumped 8.5% 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 Ltd. 'You'll see some market speculations or rumor 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 Co., 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 $1.67 billion. Meanwhile, Poly Developments and Holdings Group Co. reported a 63% 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 Corp. posted a preliminary net loss of 3 billion yuan 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 Ltd. '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 Ltd., China Resources Mixc Lifestyle Services Ltd. and China Overseas Property Holdings Ltd., analyst Karl Chan wrote in a note. The shares of the firms are up at least 8% 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 Ltd. and Greentown Management Holdings Co. are among its top picks. C&D's shares are up 26% this year while Greentown has declined 13%. 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 Co., 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.'
RTHK
3 days ago
- Business
- RTHK
Beijing push against cut-throat prices lifts HK stocks
Beijing push against cut-throat prices lifts HK stocks The Hang Seng Index closed on Friday up 326.71 points, or 1.33 percent, at 24,825.66. File photo: RTHK Mainland China and Hong Kong stocks rose on Friday and closed the week higher, as Beijing's campaign against cut-throat price competition lifted investor sentiment. The benchmark Hang Seng Index ended at 24,825.66, up 326.71 points or 1.33 percent. The Hang Seng China Enterprises Index rose 1.51 percent to end at 8,986.47 while the Hang Seng Tech Index climbed 1.65 percent to 5,538.83. EV maker Li Auto has climbed around 15 percent this week, set for its biggest weekly gain since September 2024 after China's cabinet vowed on Wednesday to rein in what it described as "irrational" competition in the electric vehicle sector, pledging to step up cost investigations and enhance price monitoring. Tech majors traded in Hong Kong rebounded more than 5 percent this week, partly buoyed by optimism after Nvidia said it would ramp up supply of Chinese-compliant H20 chips in the coming months and look to bring more advanced semiconductors to the world's second-largest technology market. Shares of Alibaba rose 2.9 percent and were up 10 percent this week. Up north, the benchmark Shanghai Composite Index closed up 0.5 percent at 3,534.48 while the Shenzhen Component Index closed 0.37 percent higher at 10,913.84. The combined turnover of these two indexes stood at 1.57 trillion yuan, up from 1.54 trillion yuan on Thursday. Stocks related to rare earth permanent magnet and lithium mining led gains while stocks in the games and photovoltaic sectors suffered major losses. The ChiNext Index, which tracks China's Nasdaq-style board of growth enterprises, gained 0.34 percent to close at 2,277.15. China's blue-chip CSI300 Index has gained 1.1 percent this week, logging a fourth straight weekly rise, while the Hang Seng Index advanced 2.8 percent. China's top leaders pledged to step up regulation of aggressive price-cutting by Chinese companies, as the world's second-biggest economy struggles to shake off persistent deflationary pressures. UBS analysts expect China to intensify its campaign against involution competition over the coming quarters. (Reuters/Xinhua)
Business Times
4 days ago
- Automotive
- Business Times
China vows to address ‘irrational competition' in EV sector
[BEIJING] China pledged to rein in 'irrational competition' in its electric vehicle (EV) sector, reflecting authorities' increasing urgency to tackle deflationary price wars threatening economic and industrial growth. The vow came in a State Council meeting on Wednesday (Jul 16) that was chaired by Premier Li Qiang, according to a readout published by Xinhua News Agency. The gathering of what is essentially China's Cabinet pledged to effectively regulate market order in the industry and guide companies to boost competitiveness through innovation and better product quality. The government's focus on the EV sector comes weeks after the top leadership's pledged to curb aggressive price wars, prompting speculation over upcoming policy action. While Beijing is on track to meet its growth target of around 5 per cent this year, worsening deflation threatens to drag the world's No 2 economy into a prolonged slowdown. 'The leadership is clearly growing more concerned about deflation,' said Tianlei Huang, China programme coordinator at the Peterson Institute for International Economics. 'If EV prices can stabilise, then prices in upstream industries such as steel could also stabilise and ultimately that could help ease some of the downward pressure on overall prices.' Chinese EV stocks listed in Hong Kong mostly advanced on Thursday, with Geely Automobile Holdings rising as much as 2.4 per cent and BYD gaining over 1 per cent, both outperforming the benchmark Hang Seng China Enterprises Index. Policy signals Authorities will now step up monitoring of prices and costs, strengthen inspection on product quality and make sure key carmakers are paying their suppliers on time, according to the readout. The meeting called for a long-term mechanism to regulate competition and better self-discipline in the industry, without providing more details on concrete actions. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up China's EV industry has become a world leader. BYD sold more fully electric cars in Europe than Tesla for the first time ever in April. That success has raised tensions with the US and Europe over potential damage to their domestic auto companies, which are huge sources of employment. How to rein in price wars among private companies without undermining confidence in one of the prized 'new three' green sectors that President Xi Jinping has championed is becoming a growing challenge, and attracting an unusual level of intervention from Beijing. Last month, Chinese officials summoned the heads of major EV makers, including BYD, to address concerns over things including below-cost prices and mounting bills owed to suppliers. Later, BYD, Zhejiang Geely Holding Group and other major automakers pledged to shorten the period for bill payment to suppliers to 60 days. Transportation and communications products make up over a tenth of China's consumer price index basket, according to economist estimates. Prices for transportation facility, a subcategory that mainly consists of automobiles, have been in decline for three straight years. Overall consumer prices have hovered around zero since early 2023. Finding a solution to end the EV price war will be the real challenge, economists say. The authorities may resort to administrative tools such as price reviews or cost investigations to establish a de facto price floor, or coordinate a concerted capacity reduction among leading EV makers, according to PIIE's Huang, who said that those measures will not be easy. Beijing will also need to overcome local governments' resistance to letting local champions fall. Regional officials are motivated to keep unprofitable companies alive in order to protect tax income and local employment, as well as to outperform in a competition with other localities in fostering sectors favoured by top leaders. 'Ultimately, instead of encouraging competition among localities, which has fuelled overcapacity in sectors such as EVs and solar, the central government would need to stress coordination and make this a bigger part in evaluating local cadres' performance,' said Huang. Even after the number of EV makers started shrinking for the first time last year, the industry is still using less than half its production capacity. That signals a shakeout may just be getting started. Duncan Wrigley, chief China economist at Pantheon Macroeconomics, said authorities will also likely press for industry consolidation to clear out smaller loss-making firms. 'I expect they will look at traditional fuel car-making too, with lots of excess capacity given the trend shift to EVs,' Wrigley said. 'Local SOEs have put up resistance to merger and acquisition proposals, but it might just be delaying the inevitable.' BLOOMBERG
Mint
4 days ago
- Automotive
- Mint
China Vows to Address ‘Irrational Competition' in EV Sector
China pledged to rein in 'irrational competition' in its electric vehicle sector, reflecting authorities' increasing urgency to tackle deflationary price wars threatening economic and industrial growth. The vow came in a State Council meeting Wednesday that was chaired by Premier Li Qiang, according to a readout published by Xinhua News Agency. The gathering of what is essentially China's cabinet pledged to effectively regulate market order in the industry and guide companies to boost competitiveness through innovation and better product quality. The government's focus on the EV sector comes weeks after the top leadership's pledged to curb aggressive price wars, prompting speculation over upcoming policy action. While Beijing is on track to meet its growth target of around 5% this year, worsening deflation threatens to drag the world's No. 2 economy into a prolonged slowdown. 'The leadership is clearly growing more concerned about deflation,' said Tianlei Huang, China program coordinator at the Peterson Institute for International Economics. 'If EV prices can stabilize, then prices in upstream industries like steel could also stabilize and ultimately that could help ease some of the downward pressure on overall prices.' Chinese electric vehicle stocks listed in Hong Kong mostly advanced on Thursday, with Geely Automobile Holdings Ltd rising as much as 2.4% and BYD Co Ltd gaining over 1%, both outperforming the benchmark Hang Seng China Enterprises Index. Authorities will now step up monitoring of prices and costs, strengthen inspection on product quality and make sure key carmakers are paying their suppliers on time, according to the readout. The meeting called for a long-term mechanism to regulate competition and better self-discipline in the industry, without providing more details on concrete actions. China's EV industry has become a world leader. BYD Co. sold more fully electric cars in Europe than Tesla for the first time ever in April. That success has raised tensions with the US and Europe over potential damage to their domestic auto companies, which are huge sources of employment. How to rein in price wars among private companies without undermining confidence in one of the prized 'new three' green sectors that President Xi Jinping has championed is becoming a growing challenge — and attracting an unusual level of intervention from Beijing. Last month, Chinese officials summoned the heads of major EV makers, including BYD, to address concerns over things including below-cost prices and mounting bills owed to suppliers. Later, BYD, Zhejiang Geely Holding Group Co. and other major automakers pledged to shorten the period for bill payment to suppliers to 60 days. Transportation and communications products make up over a tenth of China's consumer price index basket, according to economist estimates. Prices for transportation facility, a subcategory that mainly consists of automobiles, have been in decline for three straight years. Overall consumer prices have hovered around zero since early 2023. Finding a solution to end the EV price war will be the real challenge, economists say. The authorities may resort to administrative tools such as price reviews or cost investigations to establish a de facto price floor, or coordinate a concerted capacity reduction among leading EV makers, according to PIIE's Huang, who said that those measures won't be easy. Beijing will also need to overcome local governments' resistance to letting local champions fall. Regional officials are motivated to keep unprofitable companies alive in order to protect tax income and local employment, as well as to outperform in a competition with other localities in fostering sectors favored by top leaders. 'Ultimately, instead of encouraging competition among localities — which has fueled overcapacity in sectors like EVs and solar — the central government would need to stress coordination and make this a bigger part in evaluating local cadres' performance,' said Huang. Even after the number of EV makers started shrinking for the first time last year, the industry is still using less than half its production capacity. That signals a shakeout may just be getting started. Duncan Wrigley, chief China economist at Pantheon Macroeconomics, said authorities will also likely press for industry consolidation to clear out smaller loss-making firms. 'I expect they will look at traditional fuel car-making too, with lots of excess capacity given the trend shift to EVs,' Wrigley said. 'Local SOEs have put up resistance to merger and acquisition proposals, but it might just be delaying the inevitable.' With assistance from Charlotte Yang. This article was generated from an automated news agency feed without modifications to text.
