The Zhitong Finance App learned that Dongwu Securities released a research report saying that the re-launch of PSL is expected to accelerate the implementation of three major projects, including urban village renovation and guaranteed housing, and become a strong gripper for real estate development investment. I am optimistic about local housing enterprises experienced in urban village renovation and quality central enterprise developers with stable finances, sufficient land storage, and strong products. Furthermore, contract construction companies are expected to continue to benefit from the guaranteed housing policy. Recommended: 1) Developers: Poly Development (600048.SH), etc.; 2) Target beneficiaries of urban village renovation: Pearl River Co., Ltd. (600684.SH), etc.; 3) Construction agency: Greentown Management Holdings (09979).

Incidents:

On January 2, according to the central bank's monetary policy department, in December 2023, the China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China added net additional mortgage supplementary loans of 350 billion yuan. The balance of the supplementary mortgage loan at the end of the period was $3252.2 billion.

▍ The main views of Dongwu Securities are as follows:

The monthly investment volume is the third-highest in history. It is mainly used in the three major fields of projects, including guaranteed housing and urban village renovation.

Mortgage supplementary loans (PSL) were first established in 2014, and so far they are mainly divided into 3 stages.

Phase 1 (April 2014 to January 2020): This phase added a total of 3.67 trillion yuan, mainly used for shed reform, monetization and resettlement of real estate; Phase 2 (September 2022 to November 2022): This phase added a total of 630 billion yuan, mainly for post-pandemic infrastructure and building insurance projects; Phase 3 (December 2023): The monthly investment volume was 350 billion yuan, the third highest in history, after December 2014 and November 2022.

In terms of use:

On December 4, 2023, Central Bank Governor Pan Gongsheng indicated that medium- to long-term low-cost financial support should be provided for the construction of the three major projects. It is expected that the PSL launch will mainly be used in three major engineering areas, including guaranteed housing and urban village renovation.

Based on the experience of the previous round of shed reform, the current PSL investment is expected to drive about 946 billion yuan in investment.

According to data from the Ministry of Housing and Construction, in 2016-2020, construction of more than 23 million sheds began nationwide, and an investment of about 7 trillion yuan was completed. A total of 2.59 trillion yuan was added to PSL in 2016-2020, accounting for about 37% of the investment in shed reform. Based on a 37% share calculation, the current 350 billion yuan PSL is expected to leverage real estate investment of about 946 billion yuan, accounting for about 9.0% of real estate development investment in 2023. Considering that PSL takes a certain amount of time from launch to implementation of specific projects, this round of investment is expected to promote the recovery of real estate development investment in 2024 as early as 2024.

The three major projects are progressing steadily, and it is expected that PSL may continue to be launched in the future.

Since the fourth quarter of 2023, the three major projects have progressed steadily: on October 24, 2023, the “Guangzhou Urban Village Renovation Special Plan (2021-2035)” was reviewed and approved, clarifying the scale and renewal schedule. By 2025/2030/2035, 70/120/1.55 million square meters of urban village renovation had been promoted, and it was proposed to explore and improve housing ticket placement mechanisms; on December 28, the construction of the first batch of affordable housing units in Shenzhen began centrally, totaling more than 10,000 units.

Referring to the experience of the previous round of shed reform, PSL was launched continuously for nearly 5 years from December 2014 to January 2020, with an average monthly increase of 59.2 billion yuan. PSL is expected to continue to be launched in 2024, providing financial support for the three major projects, boosting real estate investment, and improving economic growth expectations.

Risk warning:

The relaxation of real estate regulation policies fell short of expectations; the industry continued to decline and sales fell short of expectations; industry credit risk continued to spread, and liquidity deteriorated beyond expectations.