Nine Developers Limit Up as Trade News, MSCI Including and Liquidity Flood Release Animal Spirits

iFeng: A股行情走强9只地产股涨停 多家机构看好今年楼市表现
With this hot market, real estate stocks are also full today. In the Shenwan first-class industry, the real estate sector rose by 5.51% today, with a 7.4% increase on the 5th. According to Wind data, there are a total of 9 real estate stocks closing daily limit; Eastern Fortune Choice data shows that today's real estate sector main fund net inflow of 1.16 billion yuan, second only to software services, insurance and banking three sections.

In fact, the macro fundamentals of the current strict regulation of the real estate market have not changed. Thus, for real estate stocks, what is the logic of this wave of upswing? Will the hot market sentiment continue? How do brokerage institutions and senior analysts view the market performance of this sector?
Analysts say the moves aren't warranted.
However, an analyst who did not want to be named reminded him of the risks that may be faced with speculating such stocks. "This will happen in the case of market enthusiasm. But investment stocks should still look at performance in the long run."

For today's real estate stocks, many analysts interviewed by the "Daily Economic News" reporter also said that they should not be overly optimistic, that this is a wave of "moving with the market." "Today, the entire market is rising, and real estate stocks are counting up," said an analyst who declined to be named.

...Liu Feifan, a researcher at Guotai Junan International Real Estate, said in an interview with the reporter of "Daily Economic News" that the market outlook for real estate stocks will be a volatile market, with profit bottoming and valuation at the top. “The profitability of (real estate stocks) is highly certain, so the decline is bottomed out. The fundamentals should be gradually weakened this year, which limits the room for valuation.”

However, some good information should not be ignored. A positive factor is that in 2019, well-known overseas institutions are increasing their stocks in mainland China. According to information disclosed by the Hong Kong Stock Exchange, on February 1, after more than five months, the Singapore government investment company (GIC Private Limited) again increased its holdings of 2,161,300 shares of Vanke H shares, involving 66.67 million Hong Kong dollars, holding shares. The ratio increased from 5% to 6.01%.

"In the context of MSCI's important increase, real estate needs to be allocated." Liu Feifan commented on the logic of foreign investment in real estate stocks.
Not mentioned is the possibility that real estate controls fail. In the past, the government has eased real estate restrictions along with monetary policy. In prior real estate downturns, prices fell along with sales. This time sales have started falling, but prices haven't started falling across the board yet. Assuming credit growth continues, real estate controls are facing their first big test - as are capital controls.

As for stocks, the government engineered a bull market amid a cooling economy and real estate market in 2014 and 2015. That bubble helped spark a real estate recovery in cities such as Shenzhen because Chinese investors still look at property as the best asset. Real estate has government support, prices are stable or rising most of the time and housing has relatively strong property rights. I doubt analysts will go on the record predicting the government's real estate policies will fail, but perhaps some investors are betting that way.

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