Shenzhen Becomes the 3rd City to Lift Housing Restrictions; Country Garden Soars 30%, Hong Kong Property Stocks Surge

TradingKey - On Tuesday, September 9, Hong Kong property stocks saw a significant rally, with the Hang Seng Mainland Properties Index (HSMPI.HK) closing up nearly 2.91%, marking its 3rd consecutive day of gains since September 5.

Among them, Country Garden surged over 31% intraday, closing up 27.45%, leading the property stocks to a new high since its resumption of trading this year. Additionally, Shimao Group rose 27.87%, Agile Group Holdings climbed 10.64%, and Guangzhou R&F Properties increased by 8.7%, showing impressive performances.

Beyond the inclusion of Country Garden in the Stock Connect, analysts cited the rise as primarily driven by real estate policy incentives. Last Friday, September 5, Shenzhen followed Beijing and Shanghai in lifting housing purchase restrictions. The new policies in Shenzhen include lifting housing purchase restrictions in 8 districts, allowing companies to buy homes to solve employee housing issues, and adjusting purchase interest rates.

Analysts believe this is related to the current real estate market, with the government aiming to introduce favorable policies to stimulate the market and tackle the real estate crisis. Public data shows that in August, the local new home market continued its downward trend, with transaction prices hitting the 2nd lowest point of the year.

Daiwa analyst William Wu noted that this indicates the Chinese government acknowledges the industry may face pressure in the second half of the year, and the market holds greater expectations for more stimulus measures. Jason Chan, a senior investment strategist at BEA in Hong Kong, suggested that with the easing of purchase and mortgage policies in the three first-tier cities, there's speculation that new home sales in these cities could see a boost in the coming months.

However, some analysts caution that among the stocks benefiting from policy relaxation, some real estate developers have released earnings reports that are less than satisfactory. For instance, China Resources Land (1109.HK) rose 3.26% on Tuesday, but its core development sales business saw its core net profit fall 23.8% year-on-year to 3.98 billion yuan in the first half of the year, with a gross profit margin of only 15.6%, marking a historical low. China Overseas Land & Investment (0688.HK) also rose 3.36% the same day, with its net profit down 16.62% year-on-year in the first half, continuing a 34% decline trend from 2024.

Some analysts view these stock increases as reflecting market sentiment. HSBC explains this by stating, “The appeal of stocks lower on the quality curve lies in their potential turnaround if there’s further stimulus.”