The Chinese obsession with property is seemingly back and stronger than ever, if recent data are anything to go by. In September, prices in 70 cities rose by the most in three years on an annual basis. Experts have attributed this to demand that built up over two years and suddenly flooded the market. Buyers got fed up waiting for flats to become more affordable under the government’s price control scheme. So, time to buy into the big developers? Not everyone thinks so. Jinsong Du, regional head of property research at Credit Suisse in Hong Kong, says he switched from being bullish on residential property to preferring investment property at the start of October. Why? First, there is a strong correlation between money supply and housing sales. Beijing has made it clear that it is keeping monetary policy tight. As for that huge pent-up demand from the last down cycle (late 2010 to early 2012)? Its largely been absorbed in the bull market over the past 18 months. He likes real estate firms with a balanced portfolio and good exposure to commercial projects, such as CR Land (1109.HKG) and Franshion (817.HKG). “Compared to other listed names they are more exposed to investment properties,” Du said on the phone. “CR Land is more in shopping malls and Franshion is more in offices.”
Come on China, surprise me
Great expectations usually end in even greater disappointment. The upcoming Third Plenum, where Chinese policymakers are expected to start mapping out China’s economic future, could be another example. The word “reform” has circulated so many times it could be a Google keyword for China. Energy prices, finance, banking, telecoms – if it’s a big sector and important to the economy it’ll be tampered with. Giving land to farmers to sell freely. Allowing the yuan to trade freely. So much is at stake. So, little will probably be done. That, however, doesn’t help settle the question of how to balance portfolios before the big event opens on Saturday. Analysts at Macquarie in Hong Kong see a possibility that the government might move a bit faster after the plenum to take some action that most expect; thus, investors should start lining up positions in some potential beneficiaries. On environmental and energy reform, players in the natural gas chain such as China Gas (0384.HKG) look good. Railways could get a shake up, favoring China Railway Construction Corp. (1186.HKG, 601186.SHA). Understandably, that’s conservative advice. Those looking for a riskier punt could bet on state-owned enterprise reform, which several economists have said could be the surprise package of the plenum. Behemoths PetroChina (0857.HKG, 601857.SHA) and China Mobile (0941.HKG) have the assets to steam ahead if unshackled from the state.
Acer doesn’t have much to say for itself
The Taiwan-based PC maker Acer (2353.TPE) turned heads this week when it abruptly canceled an informational meeting with analysts to discuss its third-quarter earnings. Some will no doubt recall the jarring cancelation of an Acer press conference in 2012 when it was expected to release a new smartphone. The phone never got released. But the earnings did – a day early, in fact. And they were rather disappointing. The company reported a net loss of US$445.3 million (NT$13.1 billion) for Q3. Acer’s CEO said this week that he would step down in the wake of investor disappointment, and more top level changes to management are expected. Notebooks and PCs still account for up to 85% of the company’s sales, according to a report from Barclays. While it’s still the world’s fourth-largest PC maker, its shipments of those clunky machines are expected to fall 10% in the fourth quarter of the year. The company is losing market share in an industry that is being edged out by sleeker devices. Analysts are still in love with Lenovo Group (0992.HKG), much for its success with smartphones. It’s unfortunate Acer’s own smartphone launch was nipped in the bud last year. Investors should watch for signs that the company will move in that direction as it updates its leadership.
It’s been a busy week again on overseas bourses as Chinese companies pick up listing activity after a lackluster few months. Four Hong Kong IPOs were lined up for this week. PW Medtech (1358.HKG), a medical devices company, was due to list in the territory on Tuesday. Huishang Bank (03698.HKG) lists on Friday after pricing shares near the low end of range.
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