China Property:Narrowed MoM,stronger YoY growth seen in Soufun 100-city home prices

Soufun 100-city home prices up 1.45% MoM in Apr at RMB11,467 psqm.

    The China Index Academy, a research institute of Soufun, has published areport indicating that the average 100 cities’ home prices were up 1.45% MoMin April at RMB11,467psm, marking the twelfth consecutive monthly increasesince April 2015. In addition the growth in prices has narrowed down from the1.9% MoM increment in March, marking the second highest monthly increasein the past 12 months since the growth turned positive. Among the 100 cities,71 cities showed MoM increases, 25 cities saw MoM declines in ASP while 4cities saw flat MoM change in ASP. In April, the number of cities with MoMincreases in prices increased by 11, while the number of cities with MoMdeclines in prices dropped by 13 (March 2016: 60 saw MoM growth and 38saw MoM declines). On YoY terms, ASPs for the 100 cities were up 8.98% inApril, marking the ninth YoY increase since October 2014. As anotherreference, the price level in April has continued to set the new record high ASPfor the fourth consecutive months.

    Huizhou and Kunshan topped the list with over 6% MoM growths.

    For the top ten cities with fastest price growth included: Huizhou and Kunshan(both over 6% MoM increase); in addition, ASP in Huihzou has increased by20% in the first four months in 2016. The other cities with highest monthlyincrease in price included: Zhongshan (5.78%); Xiamen (5.7%); Suzhou(5.49%); Langfang (4.95%); Nanjing (4.73%); Zhuhai (4.05%); Dongguan(3.97%); and Wuhan (3.21%). On the other hand, the following cities were withover 1% MoM decline in ASP: Xuzhou (-2.44%); Tangshan (-1.98%) andAnshan (-1.1%).

    ASP in Shenzhen increased by 59.88% YoY.

    The YoY growth in ASP in Shenzhen in Apr has expanded by another 2.72pptto 59.88%; followed by 31% growths in Huizhou, 29.8% in Dongguan and25.2% in Suzhou. ASPs another 6 cities were up over 20% YoY in April:Kunshan (22.16%); Baoding (21.46%); Shanghai (21.18%); Zhuhai (20.55%);Nanjing (20.38%) and Zhongshan (20.05%). While ASPs in Sanya and Taizhouin Jiangsu have seen over 10% YoY declines in April.

    Buy COLI, R&F, Longfor, Joy City, China Jinmao, Sino Land, CK Prop.

    For the rest of 2016, we expect tighter polices for Shenzhen, Shanghai, Beijingand selected Tier-2 cities in eastern China, but continued supportive policies inother Tier-2 cities and Tier-3/4 cities. We prefer developers with high exposuresto Guangzhou, Tier-2 cities and HK, and developers that are more disciplined inlandbank purchases in open land markets and can acquire new landbank viaother sources – like COLI (given its strong M&A ability in the state-ownedarena). Our top picks are COLI, R&F, Longfor, Joy City, China Jinmao. Our TPsare based on NAVs. Key risks: unexpected economic and political volatility.