The U.S. investment bank said it believes that policy easing of the property sector looks likely to kick in, which will support Chinese real estate stocks.
looks likely to kick in, which will support Chinese real estate stocks.
"We believe the default risks and property market weakness have been largely priced into property stocks," Elly Chen, equity analyst at the bank, said in a note dated Oct. 10. "Property stocks will react on policy easing, which looks more likely now."Elly Chen"There have been several defaults since 2020 and escalating risk for a major developer default in 2021," Chen acknowledged.
"However, property stocks are pricing in part of these risks, and we think systemic risk is manageable," Chen said. China's property developers have grown rapidly following years of excessive debt, prompting authorities to roll out the "three red lines" policy last year. That policy places a limit on debt in relation to a firm's cash flows, assets and capital levels.
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