Vol. up on higher supply, inventory bounce back in the 3rd wk of Sept

Sep 17-Sep 24 transaction volume and ASP.

On a wow basis, 17 of 33 cities with data available saw volume increase,with a group median of +6% (vs. -3% for the week ended Sep 16). On a yoybasis, 25 of the 30 cities with data available saw volumes increase, with agroup median of 35% (vs. +65%). Compared with the Aug 2012 weeklyaverage, 20 of 33 cities with data available saw volume decrease, with agroup median of -7% (vs. -14%). Relatively, Tier-1 cities in aggregateperformed stronger than Tier-2/3 cities, and Southern China regionsoutperformed among the regions. In terms of ASP, on a wow basis, 12cities with data available on a median level saw prices almost flat wow (vs.

+1%); on a 3-month cumulative basis, 8 of 12 cities with data available sawprices increase, with a group median of 1.6% vs the prior 3-month average.

Ytd performance.

As of end Sept 24, 35 cities with data available saw average weekly vol in Sep9% lower than the Aug average but 28% and 40% higher than 1H12 and 2011average, respectively. Ytd, 16 of the 26 cities with data available on a medianlevel saw volumes increase with a group median of 12% yoy (vs. +12% lastweek). In terms of ASP, 17 out of the 27 cities saw prices decrease ytd, with agroup median of -5% yoy (vs. -5%).

Inventory levels.

Total inventory for 13 cities was up 0.9% wow (vs. +0.6% for the weekended Sep 16) and according to the 12-month rolling GFA sold, averageinventory take-up time (for the 13 cities we track) stayed flat compared withthe week ended Sep 16, at 14.1 months . Among 13 cities we track: (1)inventory declined in Qingdao; (2) inventory was stable in Fuzhou, Suzhou,Xiamen, Hangzhou, Ningbo and Changchun; (3) inventory continued togrow in Beijing, Shanghai, Shenzhen, Guangzhou, Nanjing and Dongguan.

Investment view.

Our Buy ideas: BCD (on CL), CRL, Longfor, Greentown, Sino-Ocean, PolyProperty (H), Sunac, Evergrade, Fantasia, Agile, Poly (A), Vanke (A), Vanke(B), Zhongnan, Gemdale, WorldUnion and Lushang. Our Sell ideas: SZInv,OCT, and CWTC. Downside risks: Policy missteps or macro hard landing.

Upside risks: Unexpected government policy easing.