INVESTORS are growing skeptical that Chinese developer stocks will stage a rebound this year, as Beijing’s reluctance to unleash sweeping stimulus deepens pessimism about the sector.
A gauge of developers’ shares notched its biggest weekly drop in four months after a key meeting on Tuesday failed to yield any concrete measures to revive the industry.
Property sales are likely to remain weak in the third quarter, with better-than-expected economic growth data undermining the case for stimulus in the near term, according to Morgan Stanley.
A four-year slump in China’s property sector is showing few signs of easing after a decline in home prices accelerated in June, and major developers reported lackluster earnings for the first half of the year.
That has left investors pinning their hopes on government support to spark a turnaround, with speculation about an aid package fueling the biggest one-day jump in developer shares in five months earlier in July.
“I haven’t touched property stocks since 2014 as all the existing housing demand had already been met,” said Sun Jianbo, president of asset manager China Vision Capital. “Policies can make the real estate slump much milder, but won’t give it a chance to recover.”
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The Bloomberg Intelligence gauge of developers’ shares has fallen nearly 9 per cent this year to underperform the Hang Seng China Enterprises Index’s 23 per cent gain.
The real estate index jumped 8.5 per cent on July 10, its biggest one-day advance since February, amid speculation that authorities would roll out supportive measures at the Central Urban Work Conference.
But Chinese President Xi Jinping refrained from announcing aggressive stimulus at the event, and instead advocated a more measured approach to urban planning and upgrades.
“Modest policies release won’t help much,” said Shujin Chen, head of China financial and property research at Jefferies Hong Kong. “You’ll see some market speculations or rumour that may lead to a temporary stock rally, but later find they’re just mostly noises.”
Given such dampened expectations, many in the market are pivoting away from the sector altogether.
Six of 20 brokers who cover China Vanke, one of the nation’s largest builders by contracted sales, have stopped updating research reports on the firm, according to data compiled by Bloomberg. The Shenzhen-based company said earlier this month its loss for the first half of 2025 may reach US$1.67 billion.
Meanwhile, Poly Developments and Holdings Group reported a 63 per cent drop in preliminary net income for the first half due to market fluctuations and decreasing profitability of carried-over projects.
Shanghai-based real estate firm Greenland Holdings posted a preliminary net loss of 3 billion yuan (S$536.8 million) to 3.5 billion yuan for the period. The firms are among those that have seen multi-year lows in analyst coverage with the latter having none, data compiled by Bloomberg showed.
Developers are seeking ways to boost liquidity via asset sales, an extension in bank loans and debt restructuring. The regulator has introduced a requirement for state-owned developers to avoid defaulting on publicly issued debt, but the overall sentiment remains bearish.
“Fundamentally, it’s not a sector worth holding,” said Kenny Wen, head of investment strategy at KGI Asia. “Property sector now has a different, much less important role in China’s economy from what it was a decade ago.”
But for the bold, there are still pockets of opportunities.
JPMorgan Chase & Co. tags the sector as a tactical buy amid growing hopes for further policy support in the coming months. Its fundamental top picks are China Resources Land, China Resources Mixc Lifestyle Services and China Overseas Property Holdings, analyst Karl Chan wrote in a note. The shares of the firms are up at least 8 per cent this year in Hong Kong.
Morgan Stanley recommends that investors stay defensive and stick with state-owned enterprises with good visibility, analysts Stephen Cheung and Cara Zhu wrote in a note.
High-dividend-yield plays such as C&D International Investment Group and Greentown Management Holdings are among its top picks. C&D’s shares are up 26 per cent this year while Greentown has declined 13 per cent.
Left with little hope for a broad revival, some investors are rotating out of property and into sectors that offer better earnings upside and stronger policy tailwinds.
For Yang Junxuan, a fund manager at Shanghai Junniu Private Fund Management, the property market is “more influenced by the whole economic backdrop, which is still weak. Compared with property stocks, we’re now more inclined to buy military and AI stocks.” BLOOMBERG
