Citi has published a research report, expressing growing optimism about the prospects for China's property sector despite recent stock price corrections. These corrections were driven by a 10% week-on-week decline in secondary home transaction volumes and tightening liquidity in the stock market at the period's end. The bank's positive outlook is primarily based on resilient market transaction performance, a low base effect from July last year, an anticipated concentration of new project launches starting in September, and expectations for supportive policy signals from July's Politburo meeting. While expecting weak first-half results from developers, Citi has adjusted its preferred stock order for the sector for July and August. The top picks are now, in order, CHINA RES LAND (01109), China Cinda International (01908), KE Holdings Inc (02423), China Jinmao (00817), and China Overseas Land & Investment (00688). The bank has become more positive on China Cinda International due to product upgrades and accelerated land acquisitions.

The report notes that five developers, including China Overseas Land & Investment, China Jinmao, CHINA RES LAND, China Overseas Grand Oceans Group (00081), and China Merchants Shekou Industrial Zone (001979.SZ), achieved over 10% year-on-year sales growth in the first five months of the year, driven by strong sales of existing projects in core cities. However, overall industry contracted sales for the first five months fell 15% year-on-year due to fewer new project launches. In the land market, reduced supply in major cities pushed up prices for premium plots, leading to a 48% year-on-year decrease in land acquisition spending by listed developers in the first five months. Citi expects China Overseas Land & Investment, China Jinmao, China Cinda International, and Greentown China (03900) to accelerate land purchases in the second half when supply increases and land prices become more attractive.

Citi anticipates that first-half 2024 profits for Chinese property stocks will decline 35% to 40% year-on-year, pressured by a high base from the same period last year and gross margin pressure from inventory sales. The bank expects Poly Property Group (00119) to report a loss for the first half. However, CHINA RES LAND's recurring income grew 8% year-on-year in the first five months. Coupled with an expected one-time disposal gain of over RMB 2 billion from the spin-off of its Chengdu mall REIT, the bank forecasts its first-half profit will decline by only about 10% year-on-year, showing relative stability. Additionally, KE Holdings Inc is expected to report a 26% year-on-year increase in second-quarter profit, supported by strong Gross Transaction Value (GTV) performance.

Regarding individual stock ratings and target prices, Citi maintains 'Buy' ratings on several core Hong Kong-listed stocks. The target price for CHINA RES LAND is HK$43. For China Cinda International Group, the target is HK$18.8. For KE Holdings Inc, the target is HK$73.6. For China Jinmao, the target is HK$1.9, and for China Overseas Land & Investment, the target is HK$18.2. Furthermore, 'Buy' ratings are also maintained for China Overseas Grand Oceans (target: HK$2.68), Greentown China (target: HK$11.8), Yuexiu Property (00123, target: HK$5), and Poly Property Group (target: HK$2.8). A 'Buy' rating is also maintained for Longfor Group with a target price of HK$11.1.