Caixin report, October 18th (Reporter Yan Jun): On October 17th, leaders of the Ministry of Housing and Urban-Rural Development, the Ministry of Finance, the Ministry of Natural Resources, the People's Bank of China, and the China Banking and Insurance Regulatory Commission attended a State Council Information Office press conference to introduce relevant information on promoting the stable and healthy development of the real estate market.

The Ministry of Housing and Urban-Rural Development stated that it will, together with relevant departments, guide all regions to take quick actions, implement existing policies, introduce new policies, and launch a coordinated set of actions. Of particular interest in the set of strategies is the "two increases," whereby through methods such as monetary settlement, 1 million new units of urban villages and redevelopment of old houses will be implemented, with financing including local issuance of special bonds, etc. By the end of the year, the credit scale of "white-list" projects will be increased to 4 trillion, and all qualified real estate projects will strive to be included in the "white list." For projects on the "white list," commercial banks are expected to lend as much as possible, and disbursements should be made "as soon as possible."

However, despite the positive policies, the real estate sector ultimately closed lower. Why did this happen? How do institutional investors view the future trend of the real estate sector? What are the market's concerns regarding these positive policies? Several fund managers provide insights.

Why did the real estate sector decline?

On October 17th, the market fell below 3200 points, with a day of highs and lows. Looking at the industry, real estate stocks collectively plummeted, Shenzhen SDG Service dropped by over 10%, and Gemdale Corporation hit the limit down. As for stock ETFs, under the influence of the adjustment of individual real estate stocks, real estate ETFs, building materials ETFs, infrastructure ETFs, and related sectors saw significant declines.

What confuses investors is why, despite the Ministry of Housing and Urban-Rural Development leading five departments in a specialized meeting on real estate, the real estate sector did not respond with a significant increase.

Industry insiders find the market's performance not difficult to understand. Firstly, under a series of positive policies, the real estate sector had accumulated substantial gains in the previous period. With the arrival of these positive developments, many funds began to realize profits.

Taking china vanke co.,ltd. as an example, from September 11 to October 16, the china vanke co.,ltd. A-reit interval rose by nearly 59%, and the profit-taking funds had been reflected on the 16th. The real estate index also rose by 41.1% in that range, which is the choice of many block orders.

Secondly, in terms of policies, institutions believe that the market reaction is biased towards neutrality.

Bullish news comes from the possible launch of urban village and old housing renovations, giving a more lenient policy to the real estate market. In the evening of the 17th, the Shanghai Housing Provident Fund Management Committee issued a notice adjusting the policy for individual housing loans from the housing provident fund. For those identified as the second set of improved housing, the minimum down payment ratio is adjusted to 25%. This further optimizes the provident fund policy after Shanghai loosened property purchase restrictions and reduced commercial loan down payment ratios.

At the same time, some institutions point out that despite signs of market recovery, there are still challenges such as overcoming difficulties in house delivery, land reserves, and acquiring existing houses.

Publicly offered funds discuss the 'two increases.'

The real estate policy combination is precise and powerful, effectively responding to market concerns. Publicly offered funds generally pay close attention to the 'two increases' mentioned in this press conference.

According to public funds, through the monetization of housing, 1 million sets of urban village renovations and dilapidated house reconstructions will be newly implemented. The whitelist loan amount is increased to 4 trillion, aiming to include all projects in the whitelist. This newly proposed implementation of 1 million sets mainly targets projects that are mature in conditions and can be advanced through increased policy efforts, mainly adopting a monetary resettlement method, which will be more conducive for the public to choose the appropriate method voluntarily. The increased whitelist loan amount helps maintain the cash flow stability of real estate companies, promoting the long-term healthy development of the real estate market. Meanwhile, the precise and effective coordination of other collaborative policies promotes the stabilization of the real estate market.

China Europe fund points out that this press conference more reflects that the core change in this policy is to maintain asset prices. In the first half of this year, the main logic of real estate policies shifted towards the demand side, but at that time did not focus on maintaining asset prices, and did not provide a target for asset prices. Since late September, the policy has mainly emphasized the maintenance of asset prices and clearly stated the goal of maintaining asset prices, including stock prices (setting up convenient tools for securities market swaps and increasing repurchases and loans) and property prices (requiring real estate stabilization and recovery). The collaboration of multiple ministries such as the central bank, the Ministry of Finance, the Ministry of Housing and Urban-Rural Development, and the Ministry of Natural Resources also indicates that the government is starting to focus on repairing residents' balance sheets.

The relevant departments will coordinate a package of policy measures, with both supply and demand of special bonds making efforts together, fiscal support policies are expected to follow up, and the performance of the real estate sector in the fourth quarter is worth looking forward to. China Europe Fund stated that companies with solid fundamentals and strong logic will gradually demonstrate advantages next. Overall, there are still structural opportunities in the market at the trillion-level transaction level.

Bosera Fund stated that the incremental information from this meeting mainly focuses on the "two increases", with two measures providing specific policy information to resolve existing issues, which can help win the battle of home completion, effectively alleviate concerns of future homebuyers about completed but unsold properties. Since the end of September, the national real estate market, especially the secondary housing market in representative cities, has seen improved transactions, further reducing home purchasing costs. The subsequent completion of homes, resolution of credit issues for real estate enterprises, will help further boost the new housing market. The current stability in real estate policy direction is clear and the measures are appropriate. As policies gradually take effect, it will directly benefit the real estate sector and related financial and industrial chains in the medium term, further boosting overall economic confidence and benefiting Chinese assets as a whole.

Citic Bank Fund also mentioned that various departments have introduced a combination of policies to firmly implement the policy goal of stabilizing the real estate market. The "two increases" are worth paying sufficient attention to. The unexpected point of this meeting is the use of monetization to place inventory of commercial housing, enabling residents to choose housing according to their own preferences, reducing the transition time. Strengthening the "white list" will help alleviate the financial strain on real estate companies caused by slowing sales, as well as resolve issues such as some sold but under-construction projects facing difficulties in timely delivery, promoting stable and healthy development of the real estate market.

CAITONG Fund pointed out that recent important meetings have all made statements related to the real estate sector, such as policy coordination to support the real estate market, resolving local debt risks, increasing fiscal expenditure, and optimizing tax policies, all of which are conducive to promoting the stabilization of the real estate market. In particular, the Ministry of Housing and National Development's meeting and the fiscal debt policy jointly demonstrate the country's comprehensive strategies in stabilizing the real estate market, resolving local debt risks, and safeguarding people's livelihoods, aiming to promote stable and healthy economic development through multifaceted policy support.