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Market Report Summary - 19 May 2015

China Property Monitor

Core Content

• Primary Property Price Trends: In April 2015, primary property prices showed differentiated trends across city tiers. Tier1 cities experienced the most significant MoM increase (0.93%) since Q4 2013, while low tier cities saw a further decline in prices.
• Secondary Housing Prices: Secondary housing prices in low tier cities showed signs of stabilization, with the price decrease decelerating to 0.01% MoM from 0.17% MoM in March.
• Primary Property Sales: The primary property sales in 44 cities reached 104.9k units in H1 May, indicating a market recovery in low tier cities. Sales increased by 18.9% MoM and 31.8% YoY.
• Inventory Trends: Inventories in 18 monitored cities remained stable due to increased property supply offsetting the growth in property transactions.
• Market Outlook: The report expects the property market recovery to spread to low tier cities in the near future, which will benefit developers such as Sunac, Vanke COLI, KWG, and Country Garden.

Key Points

• Tier1 Cities: Prices increased by 0.93% MoM, and the number of cities with MoM price increases rose.
• Tier2 Cities: The price downtrend decelerated from 0.14% MoM to 0.04% MoM, and the number of cities with MoM price increases increased.
• Low Tier Cities: Prices dropped by 0.24% MoM in April, but the rate of decline slowed compared to March. The number of cities with MoM price drops decreased from 33 to 26.
• Developer Impact: Developers focusing on low tier cities, such as Country Garden, may benefit from the gradual recovery in these markets.

TMT Sector Highlights

Core Content

• Alibaba & Shanghai Smart City Initiative: Alibaba and the Shanghai government signed an agreement to develop smart city and IT services, leveraging the city's cross-border e-commerce pilot project.
• JD Investment in Kingdee: JD invested $171 million in Kingdee International Software Group for a 10% stake.
• iQiyi Denies Merger Rumors: iQiyi denied rumors of a potential merger with Youku Tudou, stating no communication had occurred.
• Faster and Cheaper Broadband: Major carriers announced faster broadband services and new discounts in response to government initiatives.
• Shanghai Pharma & JD Partnership: Shanghai Pharma partnered with JD.com to expand online drug sales.

Key Points

• Smart City Development: Alibaba and Shanghai are collaborating on smart city projects, focusing on e-commerce and IT services.
• Strategic Investment: JD's investment in Kingdee underscores its strategy to strengthen its supply chain capabilities.
• Market Expansion: Shanghai Pharma's partnership with JD.com is aimed at tapping into the growing online pharmaceutical market.
• Policy Response: The government's call for faster broadband and lower internet prices prompted major carriers to respond with improved services and pricing.

Stock Market Performance

Core Content

• HK Equities: The Hang Seng Index closed at 27,591, with a slight decline of 0.8% MoM. The H-Share Index closed at 13,926, with a 0.6% drop.
• China Equities: The CSI 300 Index closed at 4,575, with a 0.9% drop. The Shenzhen Composite Index increased by 2.4% MoM.
• Asian Equities: The Nikkei 225 rose 0.8%, Korea KOSPI 0.3%, and Taiwan TWSE 0.3%.
• US/European Equities: The DJIA increased 0.1%, S&P 500 0.3%, and NASDAQ 0.6%. The UK FTSE 100 and Germany DAX also showed positive growth.

Key Points

• HK Equities: Declined slightly, with a total turnover of HK$123 billion.
• China Equities: Mixed performance with some indices showing growth and others declines.
• Asian Markets: Mostly stable, with the Nikkei 225 and India Sensex showing positive changes.
• US Markets: The S&P 500 and NASDAQ showed modest gains, while the FTSE 100 and DAX had mixed results.

Other Indicators

Core Content

• Commodity Prices: WTI oil decreased by 0.4%, gold increased by 0.3%, and copper and aluminum futures showed no change.
• Currencies: CNY and CNH showed slight fluctuations, while USD and Euro remained relatively stable.
• Interest Rates: HIBOR 3m decreased slightly to 0.39%, and USD LIBOR 3m remained at 0.28%.

Key Points

• Commodity Trends: Oil prices dropped, while gold showed a small increase.
• Currency Movements: CNY and CNH had minor changes, and USD and Euro remained stable.
• Interest Rates: HIBOR and USD LIBOR showed minor fluctuations, indicating a stable financial environment.

China Property Developers Peer Comparison

Core Content

• Performance Metrics: The table includes performance metrics for various property developers, such as price changes, EPS growth, PER, PBR, and dividend yields.
• Notable Developers: Sunac, Vanke, Country Garden, and others are highlighted with their respective financial metrics.

Key Points

• Sunac: Suspended trading on 15 May, with a 2.1% increase in price.
• Vanke: Showed a 22.0% increase in price, with a higher EPS growth.
• Country Garden: Experienced a 7.6% price drop, but showed positive EPS growth.

Summary of Key Trends

• Property Market Recovery: Low tier cities are showing signs of recovery, with stabilization in secondary housing prices and increased sales.
• TMT Sector: Collaboration and investment in smart city development, ERP software, and online healthcare services are key trends.
• Stock Market: Mixed performance across regions, with some indices showing growth and others declines.
• Commodities and Currencies: WTI oil and some other commodities showed slight declines, while gold and certain currencies had minor increases.
• Interest Rates: Slight declines in HIBOR and stable USD LIBOR suggest a stable financial market.

Conclusion

The report indicates a mixed but improving trend in the property market, particularly in low tier cities, with stabilization and recovery signs. The TMT sector saw strategic investments and partnerships, while the stock market had varied performance. Commodities and currencies showed minor fluctuations, and interest rates remained stable, suggesting a cautiously optimistic market environment.