(Bloomberg ) Morgan Stanley (NYSE:) has upgraded its view on China’s property sector to “attractive” from “in-line” as it sees growing likelihood of easing measures, with default risks and housing market weakness largely priced in.
“We believe an inflection point for China’s property policy is approaching,” analysts led by Elly Chen wrote in a note dated Sunday. “Property stocks will react on policy easing, which looks more likely now.”
China’s tightening policies on the property market to curb excess debt buildup and speculation have led home purchases to drop sharply in the past few months. China Evergrande Group is one of the most indebted developers. Fantasia Holdings, on the other hand, has defaulted. This situation has roiled financial markets fearing contagion.
Expectations on policy easing are growing after China’s central bank last month urged financial institutions to help local governments stabilize the rapidly cooling market and ease mortgages for some homebuyers.
Harbin, a northeastern Chinese city, is taking measures to help its property market. It offers home-purchase subsidies for those who meet certain criteria and makes more eligible to receive lower-cost mortgages.
Bloomberg Intelligence’s gauge of mainland developers plunged 22% in this year. Poly Developments and Holdings Group Co., China Resources Land Ltd. and Longfor Group Holdings remain the brokerage’s top picks and Sunac China Holdings is also preferred now on its “improving balance sheet, strong asset liquidity in high-tier cities, and attractive valuation.”
Morgan Stanley also upgraded China’s property management industry to “attractive” from “in-line”, after a 30% pullback from July’s peak. Sunac Services Holdings is a favorite, as well as CIFI Ever Sunshine Services Group.
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