Citi says ‘good time’ to accumulate Chinese property stocks(April 24): Citigroup Inc strategists called on investors to build positions in Chinese property stocks, as policy support and better management practices are expected to improve the sector’s profitability.
“We reckon it is a good time to accumulate China property sector over a two-year horizon, with ongoing return-on-equity (ROE) improvement on asset turn and pricing”.
Citi’s call comes after the brokerage turned less bearish on the sector in February, citing policy hopes and signs that sales are stabilising.
The analysts said they expect “positive support” from the Politburo meeting in late April, after Premier Li Qiang urged officials to strengthen their efforts to nurture the real estate market.
The latest data showed China’s home price decline eased again in March, before a trade war with the US intensified.
Citi said while April is a low season for new home sales, the outlook is positive for June given active housing replenishments that took place earlier.
The analysts also cited top management changes at firms including China Vanke Co and Greentown China Holdings Ltd as a reflection of “strengthened control to enhance shareholders’ value by optimising management efficiency and structure”.
HSBC Holdings plc analysts also turned more positive towards the sector, seeing an ROE recovery for leading developers, which will lead to earnings upgrades.
“The convergence of
low rates, a supply squeeze and credit normalisation presents a cocktail of conditions, that are driving a structural property market recovery,” HSBC analysts including Michelle Kwok wrote in a note.
Despite the emerging optimism, the ailing sector is struggling to win back investors after a multi-year slump
Source: Bloomberg
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