Possibility of national housing policy easing in China rises due to weak property sales, falling prices – JPMorgan

 

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The possibility of a nationwide real estate easing in mainland China is rising due to weaker-than-expected property sales and a pullback in property prices, said JPMorgan in a research note. 

A reduction in the down-payment ratio for property purchases will likely be the first step, it said. 

Embattled property developer China Evergrande Group has released its long-awaited earning results, which also reflect the difficulties faced by most beleaguered real estate companies in the country, the said. 

Due to low investor expectations, the broker assumed that the industry’s performance is likely to remain lackluster until the policy is confirmed.

In the short term, developers’ share prices are likely to remain under pressure due to market concerns over contagion risk, however, short-selling the sector will be risky, as there will be a lot short covering in the event of news of policy easing, even if they are unconfirmed market speculations, it added.

JP Morgan believed that the recent relaxation of household registration restrictions in Zhejiang is of limited help and meanwhile, the negative equity of China Evergrande group as shown in its long-awaited earnings results may foretell the future story of most financially distressed Chinese property developers.