Tianfeng Securities: How should we interpret the "white list of real estate developers" and the "three no less than" policy?

Zhitong App learned that on November 17th, Tianfeng Securities released a research report stating that a financial institution symposium was held by the central bank and two other departments on November 17th to discuss multiple real estate financial easing policies. The financing support on the supply side continues to follow the "three arrows" parallel path, and the bank predicts that the financing situation of the industry in 2024 is expected to see a recovery. The high-level policy easing on the demand side may drive the phased release of demand improvement, but the long-term effects still need to be observed. However, the bank believes that with unstable demand and continuous policy adjustments, the simultaneous implementation of supply and demand policies is expected to continue driving the sector's market trends. The bank is also paying attention to the expectation gap in financing support.

Event: On November 17th, a financial institution symposium was held by the central bank and two other departments to discuss multiple real estate financial easing policies. Key point 1: The meeting proposed the "three not lower than" principle: 1) The growth rate of real estate loans of each bank should not be lower than the average growth rate of real estate loans in the banking industry; 2) The growth rate of public loans to non-state-owned real estate enterprises should not be lower than the growth rate of real estate loans in the bank itself; 3) The growth rate of individual mortgages for non-state-owned real estate enterprises should not be lower than the growth rate of mortgages in the bank itself. Key point 2: Financial regulatory departments will create a "white list" for real estate enterprises, which may include 50 large-scale real estate companies, and they will receive support in various aspects including credit, debt, and equity financing.

Tianfeng Securities' views are as follows:

What will be the impact of the "three not lower than" principle?

The first "not lower than" principle, which requires each bank's own real estate loan growth rate to not be lower than the average growth rate of real estate loans in the banking industry, indicates that the overall growth rate of banks' real estate business may increase compared to the past. Banks need to avoid being a drag on the industry. State-owned major banks may become more active in providing real estate loans, especially in public business. The second "not lower than" principle, which requires the growth rate of public loans to non-state-owned real estate enterprises to not be lower than the growth rate of real estate loans in the bank itself, and the third "not lower than" principle, which requires the growth rate of individual mortgages for non-state-owned real estate enterprises to not be lower than the growth rate of mortgages in the bank itself, can be seen as substantial measures proposed in this meeting to support the financing needs of real estate enterprises in an equal manner. They have a strong focus on private real estate enterprises and mixed-ownership real estate enterprises.

After the implementation of the "16 financial measures," the credit scale for some real estate enterprises has increased, but there is still room for improvement. The bank believes that this meeting has set the lower limit for banks' support for private enterprise financing at the specific indicator level, which will help improve the common problem of financing difficulties for non-state-owned enterprises in the industry. Financial institutions taking the lead in weakening their preference for credit qualifications may help residents overcome their "state-owned enterprise belief" and alleviate concerns about defaults, which may also contribute to the recovery of sales for private enterprises.

Which real estate enterprises may be included in the 50-company white list?

The proposed financing support white list will cover 50 large-scale real estate companies, including New World Development, Vanke, and Longfor Group. The coverage range has expanded compared to the beginning of the year, and it continues to focus on the support path of credit, debt, and equity financing. The bank believes that this adjustment continues the strategy of "stabilizing the demand first and stabilizing the main body." Against the backdrop of weak recovery momentum on the demand side, the core goal of the policy is to alleviate the problems caused by recent sales weakness, intensified cash flow pressure on large-scale high-quality real estate companies, and the expansion of industry credit risks. According to a report from China Real Estate News, in terms of form, the whitelist may be formulated by financial institutions themselves, with initial guidance from the central bank, and the first 50 companies will be claimed by various commercial banks. In terms of scope, the initial selection may be based on the top 50 sales rankings. Referring to the sales rankings of Ke Research until October 2023, the bank believes that: 1) Uninsured high-quality non-state-owned enterprises have a high probability of being included in the whitelist, which is the focus of this adjustment. Examples include Vanke, Longfor, and Country Garden, as well as other private enterprises that have received support from the "second arrow" such as Midea and Excellence; 2) Mainstream state-owned enterprises will be considered based on their equity sales scale; 3) At the same time, it is not ruled out that there will be greater financing support for companies that have encountered risks but are still operating steadily and have the task of delivering completed buildings.

Private enterprise bond issuance continues to advance, approval for equity financing may be expedited

From the bond perspective, as of November 22, the "second arrow" has supported approximately 20 private enterprises in issuing more than 36 billion yuan of debt financing instruments. There has been substantial progress in private enterprise bond financing compared to last year. However, private enterprises still face difficulties in obtaining credit support due to reduced cash flow and lack of new land reserves. Therefore, the bank believes that the support for private financing through the "second arrow" may continue to increase in the future. This may include policy extensions, expansions, and increments, with more uninsured private enterprises receiving substantial support and a significant reduction in short-term default risks. From the equity perspective, more than 30 real estate companies have applied for equity financing since 2023, and 8 real estate companies' private placement plans have been approved by the China Securities Regulatory Commission. The progress of private placement varies among different real estate companies. The bank believes that after this symposium, the channel for real estate companies' equity financing is expected to expand, and the approval process will be accelerated to repair the balance sheets of high-quality real estate companies, improve their cash flow, and guide market entities back to normal operating conditions.

New home sales in November decreased by about 20% YoY, while second-hand home sales rebounded MoM

In the new home market, there were 3.21 million square meters of transactions last week, a YoY decrease of 18.05% and a MoM decrease of 8.68%. The cumulative inventory was 166.51 million square meters, with accelerated clearance in second-tier, third-tier, and lower-tier cities, and slower clearance in first-tier cities. In the second-hand home market, there were 1.82 million square meters of transactions last week, a YoY increase of 25.82% and a MoM decrease of 3.91%. In the land market, there were 28.17 million square meters of transactions in terms of floor area last week, a YoY decrease of 27.73%, and the total transaction amount was 43.6 billion yuan, a YoY decrease of 28.27%. The national average premium rate was 2.32%, a YoY decrease of 0.16%.

Last week, the Shenwan Real Estate Index increased by 4.17%, a 4.48% increase compared to the previous week, ranking 1st out of 31 indexes and outperforming the Shanghai and Shenzhen 300 Index by 5.01%. As for H-shares, the Wind Hong Kong Real Estate Index increased by 4.68% last week, a 2.36% increase compared to the previous week, ranking 1st out of 11 indexes and outperforming the Hang Seng Index by 4.07%. The Ke Research Leading Index for real estate stocks increased by 9.47%, a 7.45% increase compared to the previous week. Target Sector:

1. Recommended high-quality real estate leaders: China Merchants Shekou (001979.SZ), Poly Developments (600048.SH), China Overseas Development (00688), and suggested attention to Yuexiu Property (00123), China Resources Land (01109);

2. Recommended undervalued property management companies: China Merchants Property (001914.SZ), Poly Property (06049), and suggested attention to Wanhuyun (02602), Jinke Services (09666);

3. Suggested attention to affordable housing and urban village transformation themes: Greentown Management Holdings (09979), Urban Construction Development (600266.SH), China Enterprise (600675.SH).

Risk Warning: Industry credit risks spreading; industry sales decline exceeding expectations; policy implementation not meeting expectations.