ETF Idea As the Evergrande crisis deepens, what's next for t | FSMOne SG - Research Highlights

ETF Idea

As the Evergrande crisis deepens, what's next for the Chinese real estate sector?

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• Supported by demand driven by population influx, we expect housing prices in higher-tier cities to maintain some growth even as regulations stay in place.

• With the lowering of land premium caps, land prices could be kept under control. This would help to stabilise the gross margins of developers.

• 57% of developers in the MSCI China Real Estate Index have met all the requirements under the Three Red Lines, enjoying the maximum debt growth of 15% per annum. Due to their strong balance sheets, they are likely to achieve a brighter growth outlook.

• In view of the near-term headwinds, we downgraded our fair PB ratio for the sector to 0.9X from 1.0X. This translates to an upside potential of 73%. Despite the attractive upside potential, we see a lack of share price catalysts in the near-term.

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: Global X MSCI China Real Estate ETF (NYSE:CHIR)