The mainland property sector lurches between two extremes: euphoric price rises and crushing anti-bubble actions by regulators. Even when it is riding high the industry is ever wary of the next clampdown on its credit, restrictions on new mortgages, or a vast state-led increase in land supply.
Analysts like the listed property developers that are still controlled by the state, which have more exposure to modest flats in so-called third tier markets. The following are some analysts' calls for the sector.
Johnson Hu, CIMB
Buy: Evergrande Real Estate Group (3333).
Sell: Guangzhou R&F Properties (2777)
Hu has a buy rating on Evergrande because of its high exposure to third-tier cities that are unaffected by home-purchase restriction policies (cities where people can buy homes with little interference from authorities). Evergrande has also registered strong sales, capturing a 65 per cent rise in contracted sales in April, according to CIMB.
'We are confident the firm will meet contract sales targets this year, given its progress so far,' Hu says.
He is less impressed with Guangzhou R&F, which is more high-end targeted, and which has a lot of debt.
'The gearing is around 100 per cent, which will be challenging for this company in an environment of credit tightening. The company has less financial ability to expand its land bank,' Hu says.
Danny Bao, Daiwa
Buy: China Overseas Land and Investment (688)
Bao's top pick is China Overseas Land, which is listed but controlled by the mainland government, and which should be a beneficiary of policies to deflate the property sector.
'The policies are negative for the sector but good for China Overseas Land,' Bao says. He adds that, being state-controlled, China Overseas will have cheaper access to funding, which should let the firm build its land bank and eclipse rivals.
Bao declines to name his 'sells' for the sector, but says high-end developers will be most vulnerable to the tightening measures. 'The government policies will cap high-end prices, which will discourage people buying property for investment purposes,' Bao says.
Ricky Mui, CLSA
Buy: Glorious Property Holdings (845).
Sell: Yanlord (YLLG)
Mui rates Glorious Property a 'buy', if only because the firm has an undemanding price-earnings multiple of 4.25. 'The momentum is great. Their contract sales have grown 140 per cent year on year.'
Mui's positive outlook is based in part on the firm's focus on third-tier markets, such as Harbin and Hefei.
Mui is negative on Yanlord due to policy risks hanging over it. The firm is relatively high end with a concentration in the pricier, tier-one markets of Shanghai and Beijing. 'Shanghai and Beijing are more policy-heavy and the developments are more high end,' Mui says.
Eugene Cheung, Macquarie
Buy: Evergrande Real Estate Group (3333), China Overseas Land and Investment (688)
Cheung also favours Evergrande for its heavy exposure to the mainland's second- and third-tier market. Its properties are relatively cheap, so it will be less affected by the state's cooling measures, Cheung says.
He is also disposed to China Overseas Land, which 'is [state-owned enterprise] backed, so will be less affected by the bank tightening - they will have access to funding', Cheung says. He adds he does not like higher-end developers.
The views stated here belong to analysts, and are not stock calls by the South China Morning Post