China property prices down in six months

Prices fell consecutively on a month-on-month basis, and declining price trend is expected to persist through end 2Q12.

Maybank King Eng said:

Mainland Mar property prices fell six months consecutively on MoM basis. We anticipate that the declining price trend will persist through end 2Q12 as developers cut prices to clear inventory.

Shimao, Greentown and Glorious Property are players with higher exposure in Eastern China, where price correction is most pronounced. Only Longfor and C C Land are among the rare few that have reported price rebounds because of their exposure to Chongqing, where strong buyer demand is supporting the underlying market.

We advocate a defensive stance and would stick to low-beta/yield plays such as COLI, CR Land and SOHO China. Price performance of Shimao and Greentown is vulnerable to the weak pricing environment while Evergrande’s low achievement ratio of 10% may also prompt it to cut prices. Sell the latter three.