China Property: An Inflection or Another False Start?

Research evidence excerpt

China Property: An Inflection or Another False Start?

Asia Pacific InsightM

An Inflection or Another False Start? Key Charts

Exhibit 2: Comparison of market and our views

Market Morgan Stanley

Sustainability is in doubt given limited improvement in macro/housing

Strong rebound in March-April without notable policy support may indicate an

Sustainability of secondary sales indicators, divergent trends between new and secondary homes, and still-

organic recovery in the making

fragile resident sentiment

Secondary sales rebound could pull up primary sales volume via replacement Secondary sales pickup may cannibalize primary sales due to more

Diffusion into new homes

demand from home sellers competitive pricing, as home sellers are still eager to dispose of properties

Home prices in high-tier cities in

Persistent m-m uptrend amid market recovery Continued soft downtrend

2026-27

Whether the sales recovery is strong, broad and profitable enough to justify

Key focus Whether the worst has passed in high-tier cities?

share prices?

Reduced primary market size, constrained leverage, homogeneous

Core profits to witness dual expansion amid notable sales and margin

Developers' normalized profit level landbanking strategies, and continued drag from legacy inventory would limit

improvement

medium-term earnings rebound potential

P/B to recover to historical average level of ~0.8x (vs. ~0.5x now), suggesting 2028E P/E and ex-IP EV/pre-sales have already exceeded bull-market levels;

Valuation

at least high-double-digit % upside potential solid EPS uplift is key to driving share prices higher

Stock selection Pure beta: COLI (0688.HK) / Jinmao (0817.HK) Beta + Alpha: CR Land (1109.HK) / C&D (1908.HK)

Source: Morgan Stanley Research