Market Watch reports that analysts are of the opinion that backed by increased bank lending and staunch government support in China, the sector is expected to outperform in coming weeks.
However, Royal Bank of Scotland analyst David Ng wrote in a report that the recovery in the property market is ‘leading, but not causing, a recovery’ in the Chinese economy,
He said, ‘We believe the medium-term prospects for developers are attractive, as we expect a return to a more normal operating environment in 2010, a sufficiently large and cheap land bank, and a possible shortage of supply’ in the first half of 2010.
Several Hong Kong-listed Chinese property stocks have outperformed the Hang Seng China Enterprises Index (a closely watched index of Hong Kong-listed mainland stocks) as well as the broader market so far in 2009.
Marco Mak, head of research at Taifook Securities in Hong Kong, said, ‘Even under the current economic situation, quite a lot of buyers are coming back into the property market. That means there is confidence there. When the economy improves, the situation should be even better.’
Most of the Chinese property share are still way off their peaks after a disastrous performance in 2008, when shares of several property developers lost at least half their value, as government restrictions on bank lending crimped demand.
The turnaround in investor sentiment comes amid strong sales in major cities in China over the past few weeks.
In a recent note, UOB Kay Hian analysts said inventory levels of housing units dropped by up to 17% last week.
They added, ‘We expect sales to stay strong for the next quarter on the back of substantially improved market sentiment, better economic outlook with the support of government policy, as well as increasing affordability, after a 15% to 40% price drop in major cities.’