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

Overview of CR Land (1109 HK)

China Resources Land (CR Land) is identified as one of the preferred state-owned enterprises (SOEs) in the property sector, benefiting from its stable financial performance and significant exposure to Tier-1 cities. The recent government easing measures targeting the housing market are expected to positively impact CR Land, given its strong presence in key urban centers.

Government Easing Measures in Tier-1 Cities

As of 30 September 2024, several Tier-1 cities, including Shanghai, Guangzhou, Shenzhen, and Beijing, introduced measures to stabilize the property market. These measures included:

1. Home Purchase Restriction Loosening: Full removal of restrictions in Guangzhou, with partial easing in other cities such as Shanghai, Shenzhen, and Beijing.
2. Lowering of Down Payment Ratios: Down payments for first and second homes were reduced, although second-home down payments remained above the national average.
3. Value-Added Tax (VAT) Reductions: A reduction of VAT for secondary homes, with a 5% exemption for homes held for over two years in Shanghai and Shenzhen.
4. Removal of Home-Selling Restrictions: Shenzhen lifted all restrictions on selling homes, contributing to a more flexible housing market.

Impact on CR Land (1109 HK)

CR Land stands to benefit from these supportive measures as it has a high level of exposure to Tier-1 cities, where property demand is expected to improve due to the loosening of purchase restrictions and reduction in down payment requirements. The company’s robust financial status further supports its ability to capitalize on these favorable market conditions.

Favorable Market Dynamics

The Chinese property sector saw a notable rally following the announcement of these easing measures, with the SSE Property Index surging by 34.3% from its low on 18 September 2024. Both privately-owned enterprises (POEs) and state-owned enterprises (SOEs) benefited from the market’s rebound, and CR Land’s strong presence in key urban markets has positioned it to take advantage of the ongoing recovery.

Strategic Positioning in Tier-1 Cities

CR Land’s high exposure to Tier-1 cities is a key strength, as these cities represent some of the most valuable real estate markets in China. With the easing of restrictions and an expected increase in property transactions, CR Land is well-positioned to capture growth in both sales and market share in these prime locations.

Conclusion

CR Land is set to benefit from recent government measures aimed at revitalizing the property market, particularly in Tier-1 cities where it has significant exposure. The company’s stable financial performance and strategic presence in key urban centers make it a top contender for continued growth as the property market in China recovers.