Chinese property stocks in Hong Kong fell again. At the time of writing, ZHONGLIANG HLDG (02772) dropped 5.56% to HK$0.034, R&F PROPERTIES (02777) declined 2.67% to HK$0.365, and SUNAC (01918) decreased 1.89% to HK$1.04. According to the China Index Academy, the property sector continued its marginal improvement in March, with Beijing and Shanghai experiencing a "small spring" rally. In the new home market, following post-holiday demand release, the launch of premium projects in key cities, and increased marketing efforts, the year-on-year decline in new home transactions narrowed to 13% in March. The month-on-month decline in second-hand home prices across 100 cities continued to narrow, with prices rising in Shanghai and Hefei. In the land market, the transaction area and revenue from residential land sales in 300 cities fell by 15% and 35% year-on-year respectively in March, but the rate of decline moderated. Morgan Stanley released a report stating that developers' weak 2025 performance was in line with market expectations. Core earnings fell by an average of 29% year-on-year, mainly due to an 11% year-on-year drop in revenue and a 1.1 percentage point contraction in development gross margin, resulting in a sector ROE of just 0.6%. While liquidity risks in the sector have largely eased at this stage, with developers generally reducing debt and maintaining stable cash coverage ratios, significant divergence remains among individual companies. The firm noted that it had anticipated a sector pullback following the sentiment-driven rebound at the end of January. In the second quarter of 2026, the sector may continue to underperform the broader market, as renewed weakness in property prices could further dampen market sentiment.