Citi strategists are urging investors to consider Chinese real estate stocks, citing policy support and improved management practices as key factors likely to enhance profitability in the sector. Analysts Griffin Chan and Cindy Li anticipate that the next two years will be optimal for investing in this sector, with expectations of improved asset turnover and pricing leading to sustained returns on equity.
Before this recommendation, Citi had already noted an improved sentiment towards real estate stocks in February, driven by policy expectations and signs of stable sales. Analysts are looking forward to potential supportive measures from an upcoming political meeting. Recent data shows a narrowing decline in China's housing prices in March, and despite April being a traditionally slow month for new home sales, a positive outlook is expected for June due to previous inventory replenishment efforts.
Citi analysts also highlighted management changes at companies like Greentown China (03900), indicating efforts to enhance shareholder value through optimized management efficiency and structure. HSBC analysts share a more optimistic view of the sector, projecting a rebound in returns on equity for major developers, which could boost profitability. Factors such as low interest rates, tight supply, and credit normalization are seen as favorable conditions for a structural recovery in the real estate market.
