China Real Estate Developers:China property weekly trend:Volume in Tier-3cities outperformed;land sales recovered

Highlights for the weekVol was +8% wow/+17% yoy, and 11% lower thanDec weekly avg. Tier-3 cities showed resilientoutperformance (+13% wow/+24% yoy), led byNingbo (+237% wow) and Fuzhou (+105% wow).

Inventory was largely flat wow and 12-m movingavg. inventory months rose to 8.4 mths (vs Decavg. of 8.1 mths). Land transactions expandedwith vol/value +52%/+115% wow. Top 10 citiesaverage land sales was Rmb3.8bn, topped byGuangzhou (Rmb9.9bn) and Hefei (Rmb7.1bn), vsRmb1.9bn last week. Centaline managers’diffusion index (CMI) for the 5 major cities avgwas -0.8pp wow, indicating slightly weakerexpectations for secondary prices. Sellers’ askingprice index (CAI) was -1.4pp wow, dragged byGuangzhou (-10.7pp wow).

Key news/events1) Chongqing announced property tax andmortgage restrictions on second home purchaseof non-residents who also do not work locally. 2)MLR released guidelines for city-level propertymarket policy, including increasing residential landsupply in cities with the high ASP appreciations.

Performance & ValuationPoly H and Vanke A were the strongest share priceperformers in the past week among our offshoreand onshore coverage. Our offshore coverage isnow trading at an average 52% discount to end-17E NAV and 0.9X 17E P/B, vs. 2H2013-2014 downcycleaverages of 43% and 1.1X. Our onshorecoverage is trading at an average 32% discountand 1.6X 17E P/B, vs. 2H2013-2014 downcycleaverages of 52% and 1.6X. Top picks (CL-Buy):COLI, COGO and Poly (A) with 12-mth end-17ENAV-based TPs of HK$31.0, HK$3.7, and Rmb11.6.