Date: 3 October 2024
Broker: MIB Securities (Hong Kong) Ltd

Overview of COLI (688 HK)

China Overseas Land & Investment Ltd. (COLI) is recognized as one of the top state-owned enterprises (SOEs) in the Chinese property market, particularly benefiting from its stable performance and strong financial status. COLI’s positioning within the property sector, alongside other SOEs, has been reinforced by recent government measures aimed at supporting the property market in Tier-1 cities.

Government Easing Measures in Tier-1 Cities

As of 30 September 2024, Tier-1 cities such as Shanghai, Guangzhou, Shenzhen, and Beijing introduced a series of easing measures to revitalize the housing market. These measures included:

1. Loosening of Home Purchase Restrictions: Complete removal in Guangzhou, with partial easing in cities like Shanghai, Shenzhen, and Beijing.
2. Reduction in Down Payment Ratios: Down payment ratios were lowered for both first and second homes, although second homes still required a higher down payment than the national level.
3. Value-Added Tax (VAT) Relief: VAT for secondary homes was reduced, with a 5% exemption for homes held for over two years in Shanghai and Shenzhen.
4. Removal of Home-Selling Restrictions: All restrictions on selling homes were lifted in Shenzhen.

Impact on COLI (688 HK)

COLI, being a prominent SOE, stands to benefit from these easing measures due to its stable performance and steady financial status. The company’s focus on property sales and management in Tier-1 cities allows it to take full advantage of the improving property market conditions. As these cities experience a resurgence in demand for housing, COLI’s financial resilience and established market presence position it for continued growth.

Performance in the Property Sector

The Chinese property sector experienced a rally following the government’s announcement of these easing measures. The SSE Property Index surged by 34.3% from its 18 September 2024 low, driven by distressed valuations of both privately-owned enterprises (POEs) and state-owned enterprises (SOEs). This recovery in the sector enhances COLI’s prospects, as investor confidence in the property market strengthens.

Strategic Focus on Tier-1 Cities

COLI is well-positioned to benefit from its relatively high exposure to Tier-1 cities, where demand for housing is expected to rise as a result of the recent policy changes. These cities represent prime real estate markets, and COLI’s presence in these urban centers provides a solid foundation for capitalizing on the recovery in housing transactions and overall market sentiment.

Conclusion

With its stable financial performance and strategic focus on Tier-1 cities, COLI is poised to benefit from the government’s easing measures in China’s property market. As the market begins to recover, COLI’s strong position within the SOE segment and its exposure to key urban areas will likely drive its continued growth and success.