China Property Sector:Money supply down but land prices up

The PBoC announced on April 15 that China’s total social financing (an official way to measure money supply) declined 9% YoY in March-this should not be a surprise, as March housing sales number already predicted this. China’s housing sales volume correlates strongly with money supply, as we discussed in previous reports.

    Ministry of Land and Resources also announced that China’s land prices continue to grow. Indeed, despite 1Q14’s weaker housing sales, many developers’ appetite for landbanking remains strong.

    Credit Suisse economists believe the “two-way volatility” in the RMB exchange has hindered the domestic liquidity creation through foreign capital inflow. If so, the liquidity situation may not improve much for developers in the near future, in our view.

    We maintain our view that investors should stay defensive on the China property sector, and still prefer safer names such as COLI (688 HK) and SOHO China (410 HK).