Hong Kong-listed mainland developers saw their shares surge yesterday as more investors speculated that the worst for the sector was over amid easier lending and a continued rise in home sales.
Shares of Soho China, the biggest developer in Beijing's central business district, rose 12.82 per cent to HK$3.52.
Guangzhou R&F Properties climbed 8.89 per cent to HK$9.80 after the company posted strong property sales in the first quarter.
The developer said sales totalled 6.15 billion yuan, an 81 per cent increase from the same period last year and 39 per cent higher than in the fourth quarter of last year.
Shimao Property Holdings, which sold the mainland's most expensive villa by unit price last month, rose 5.6 per cent to HK$7.17. The stock has gained 84.79 per cent from a closing price of HK$3.88 a month ago.
Hopson Development Holdings shares advanced 9.32 per cent to HK$5.63, while Country Garden Holdings gained 7.81 per cent to HK$2.21.
'The improving visibility of the mainland housing market and reduced risk of bankruptcies have made the valuations of some mainland stocks more attractive,' said David Ng, the head of regional property research for Royal Bank of Scotland Group, who recently upgraded the sector from 'neutral' to 'overweight'.
According to official figures, the total number of units sold in Beijing, Shanghai and Shenzhen in the first three months of the year was significantly higher than in the same period last year.
About 36,000 second-hand homes were sold in Beijing in the first quarter, 101.04 per cent more than in the same period last year.
Furthermore, banks have been relaxing lending to developers, substantially lowering the risk of bankruptcies, said Mr Ng.
With a lower bankruptcy risk, these stocks became attractive.
Mr Ng said some short-term investors also took the recent rally in home sales to speculate on developer stocks, making them volatile.
Signs of hope
Investors believe the worst may be over for the property sector
Guangzhou R&F Properties said sales in the first quarter rose, year on year: 81%