Wind data shows that as of December 2, the Shenwan first-level real estate industry index has risen by 25.08% since November, ranking first among the 31 Shenwan first-level industries.

China Fund News reporter Fang Li Cao Wenjing

The real estate market ushered in the positive news of "three arrows at the same time", which greatly boosted market confidence. Wind data shows that as of December 2, the Shenwan first-level real estate industry index has risen by 25.08% since November, ranking first among the 31 Shenwan first-level industries. At the same time, real estate-related theme funds also quickly "recovered" and many products performed bravely. What impact does the relevant policies on real estate stocks and the real estate industry chain have on? Which type of companies or sectors are worth paying attention to? In this regard, a reporter from China Fund News interviewed Zou Xi, deputy general manager of Rongtong Fund and prosperous fund manager of Rongtong Industry, Xia Haoyang, manager of GF Financial Real Estate ETF and Connection Fund, Han Xue, fund manager of Fuguo Financial Real Estate Industry, Li Xin, manager of Jiashi Financial Selected Fund, Zhao Dazhen, manager of Cathay Jinlu Fund, and Hu Yaowen, fund manager of Haifutong Fund Public Equity Investment Department.

They generally believe that favorable real estate policies have brought short-term valuation repair to real estate stocks. In the medium and long term, there is a process of reshaping the pattern and increasing the concentration of industry leaders. At the same time, the real estate industry is the artery of China's economy. The gradual recovery of the real estate industry is good for all industries from a fundamental perspective. The future A-share market is worthy of optimism in the long run.

"Three arrows are fired at the same time" and the market is stable. The signal is obvious.

effectively alleviates the overall liquidity pressure

China Fund News reporter: On November 28, the China Securities Regulatory Commission issued a news report that it decided to adjust and optimize five measures in equity financing, marking that the "third arrow" to support financing in the real estate market has been shot. How much impact will the relevant policies have on real estate stocks and the real estate industry chain?

Li Xin: In just 20 days, the policy end "three arrows were fired at the same time", which has strong signal significance and greatly boosts the confidence of all parties. For real estate stocks, now is a stage of frequent positive news.

Han Xue: The policy level has all the bottlenecks supporting financing from the three main financing channels of credit, bonds and equity, and the intensity and speed of the policy "three arrows in one" have been cleared. The loosening and continuous increase in policy ends will help introduce new funds, revitalize existing real estate, and promote the credit recovery of the entire industry. At present, the primary purpose of relaxing equity financing for real estate companies is to promote "security and delivery", avoid recurrence of vicious incidents, and strongly support market confidence, and at the same time it is conducive to resolving downward risks in the real estate market and stabilizing economic development expectations. Against the backdrop of the continuous increase in policy intensity, the short-term industry valuation recovery momentum has increased marginally, and the risk preferences of the entire market are also expected to increase.

Xia Haoyang: The official implementation of the "three arrows" to support real estate financing plays an important role in alleviating the overall liquidity pressure of the real estate market or the restoration of market confidence. After the "third arrow" was shot, for real estate stocks, the recovery of equity financing will help alleviate the liquidity pressure of enterprises and further transmit it to the recovery of construction scale of upstream and downstream industrial chains. At the same time, as the default pressure of real estate companies has decreased, the pressure on real estate companies to bad debts of accounts receivable by relevant enterprises in the industrial chain has dropped significantly, and relevant enterprises have ushered in the opportunity to improve their operating quality.

Zhao Dazhen: With the launch of the "third arrow", various financing channels of real estate companies have also ended their years of restricted history. The lifelines of blood-transfusion companies such as banks, bonds, trusts, private equity and equity financing have been opened. The release of information that trillions of funds have helped ensure delivery is like a shot of a heart-warming agent in the current market environment. Not only does the existing creditors of private enterprises reduce their concerns and no longer runs, but the demand-side level also makes home buyers more at ease to buy private enterprises’ houses.

supply and demand have been steadily restored, and the value of real estate allocation has increased. The policy clarifies the bottom line of the financial system for real estate risks, and also means that the necessary conditions for industry recovery are met. Real estate is in the stage of "bottom of fundamentals + improvement in expectations", so we can continue to pay attention to related targets of real estate and industrial chains.

Zou Xi: Moderately relaxing equity financing restrictions and supporting the rational expansion of high-quality real estate companies is a natural choice to adapt to the new situation. Relevant policies will effectively improve the asset-liability structure of high-quality real estate companies, which will help them reasonably expand their asset scale and achieve sustained growth in scale and profits, and will have a significant promoting effect on the long-term stock price performance.

At the same time, when a considerable number of real estate companies are in liquidity difficulties, high-quality real estate companies will assume the function of stabilizing overall investment in the real estate market after obtaining equity financing support, which is conducive to reversing the rapid decline in real estate investment and will play a positive role in stabilizing economic growth. The related real estate industry chain, especially the industrial chains related to completion, will directly benefit.

Hu Yaowen: The "third arrow" sends a signal to stabilize the market, not only to protect the project, but also to protect the main body, and has a relatively positive effect on the market. After the financing side support policies are increased, the demand for real estate in the future will remain the focus of the market's attention. The subsequent market may expect more demand-side policies to further boost the real estate industry chain.

Real estate stocks showed an oversold rebound in the short term

medium and long term attention to the allocation value of leading real estate stocks

China Fund News reporter: Against the background of the continuous "three arrows" in the real estate industry, real estate stocks performed well. Some people believe that real estate stocks are currently in a stage of oversold expectations and valuation repair. How do you view the current performance of real estate stocks? Is it a short-term phenomenon?

Li Xin: At present, the dividend period of low factor costs has passed. It is unlikely that real estate will experience a cyclical increase like every cycle adjustment in history. In the future, it is more likely to gradually build bottoming and seek medium-term balance.

Han Xue: Looking ahead to the future market, although the medium-term problems of real estate still exist objectively, the peak of population growth has led to a weak demand, high cost pressure squeezes the proportion of residents' income distribution, and "de-real estate" has driven the long-term economic center to go down. It is still difficult to say that the trend is improving. However, from the perspective of medium- and short-term investment, the initiative in policy response is still increasing, and structural policies are gradually deepening. In addition, future demand-side policies are still worth further looking forward to. The market logic's recovery trend around "policy implementation-credit recovery-expected reversal-sales recovery" has become a consensus expectation for longing. In addition to the cumulative policy effect amplifying the industry's recovery elasticity, the increase in the concentration of high-quality leading real estate companies in the future may make real estate stocks dominate.

Xia Haoyang: The short-term performance of real estate stocks is a valuation repair brought about by the reversal of policy expectations after oversolds. From the medium and long term, there is a process of reshaping the pattern and increasing the concentration of industry leaders. The allocation value of real estate leading companies is worth paying attention to.

Zhao Dazhen: At present, fiscal and monetary policies are actively putting in place, the policy puzzle is gradually becoming complete, and the support is expected to continue. The market thinking triggered by the "Chinese Valuation System" last week, combined with real estate risk disposal and stabilizing growth, stimulated the market to produce rapid industry rotation. In the medium term, the bottom of the market is approaching, and the future market center improvement will be more certain.

Zou Xi: The performance of real estate stocks will be significantly differentiated in the future. It is expected that high-quality real estate companies will give priority to obtaining various financing resources, including credit, bond financing and equity financing, and enter a new growth cycle. Their stock price performance is very continuous; while real estate companies that have been proven to have low operating efficiency and insufficient operating strategies in the past real estate cycle will gradually shrink or even exit the market, and their stock price performance is more reflected in an oversold rebound.

Hu Yaowen: At present, the adjustment of the entire real estate industry has entered a relatively benign stage, and the policy issuance is also relatively accurate. We are more optimistic about the performance of real estate stocks, which is a sector worth paying attention to in current asset allocation.

High-quality enterprise valuation repair may continue

China Fund News reporter: How to view the valuation level of real estate stocks? Based on the fundamentals, can the subsequent valuation repair market continue? How sustainable is it?

Li Xin: Since this year is a double-kill of valuation performance, once sales recover, the sector has the opportunity to double-click. In addition, we can observe the increase in the market share of real estate companies after the industry returns to normal. In addition to development, sustainable businesses also include commercial, property and other businesses.

Han Xue: The current performance of real estate stocks is the beginning stage of rising under ultra-low valuations. The core support for this round of real estate stock rise lies in the opportunity for supply-side reform in the industry. The significant increase in market share of high-quality enterprises, significant decline in costs, and improvement in profit margins are all positive changes that can be expected.

Xia Haoyang: For the industry, the supply-side clearance of enterprises in the land market is a medium- and long-term process. Leading real estate companies will usher in an improvement in the competitive landscape. We continue to be optimistic about the investment opportunities brought by the rebound of medium- and long-term ROE under the background of improving the operating quality of leading real estate companies.

Zhao Dazhen: Real estate is an industry with a more thorough clearance in this round of economic cycle, especially in the process of economic recovery. The current real estate valuation is already at the bottom and there are great investment opportunities.

Zou Xi: From the perspective of PB and PE, the valuation level of real estate stocks is in a low state in the A-share market. The subsequent valuation repair of high-quality real estate stocks will continue, and even after the real estate market sales have effectively stabilized, it will enter a new growth cycle, and its sustainability may be measured in units of years.

Hu Yaowen: The overall valuation of the real estate industry is low. If the industry returns to a relatively healthy state, there is still obvious room for repair. However, valuation is a dynamic process that requires continuous projects and performance as support, so different companies will still be differentiated.

is optimistic about the back-end completion industrial chain

and the construction materials, light industry, home appliances and other sectors

China Fund News reporter: From the perspective of the sub-sectors of the real estate industry chain, which type of enterprises or sectors do you prefer?

Li Xin: The first type is core central enterprises and state-owned enterprises, and their market share will increase in the future, but this may take a relatively long time; the second type is sustainable businesses outside the development business, such as properties in some commercial shopping centers.

Han Xue: The current policy support is in the middle, and the marginal improvement will follow. From a fundamental perspective, the past tightening cycle has brought about significant differentiation in the financing side of real estate companies, which is specifically reflected in significant differentiation in financing scale and costs. Real estate companies with good sales, strong land acquisition efforts and high-level cities will have better certainty in future growth and profit quality.

Xia Haoyang: We are more optimistic about the back-end completion industrial chain. With the current optimization of epidemic prevention measures and comprehensive improvement of real estate companies' financing, and the focus of financing policies on supporting real estate companies' construction and guaranteeing delivery, the overall completion scale of the industry is expected to usher in a restoration. After the real estate company completes the construction of the project in hand, if the sales prosperity further reverses, cash will be used more for land investment and expand sales scale. The economic recovery cycle of the front-end industrial chain may be slower than the back-end completion cycle.

Zhao Dazhen: The country attaches great importance to guaranteeing delivery, and a number of relief funds have been launched one after another and distributed to various provinces and cities. According to our research, the speed at which funds have been implemented in projects in the past two weeks has increased significantly compared with the previous period. It is expected that these real money investment will be reflected in the growth of completion data next year, and the recovery is better than investment and new construction. Therefore, it is beneficial to the construction materials, light industry, home appliances and other sectors in the real estate industry chain.

Zou Xi: In the short term, with the effective implementation of the "protecting the building" policy measures, the completion of the industrial chain will benefit more, including consumer building materials, home furnishing and other industries. In the medium and long term, after real estate sales stabilize and gradually rebound, it is very important to see what level of sales stability, which will determine the new valuation center level of the real estate industry chain.

Hu Yaowen: It is optimistic about state-owned enterprises and central enterprises in the medium and long term. The real estate market is a diversified market, not only residential real estate, but also commercial real estate, shantytown renovation, old-town renovation, etc. State-owned enterprises and central enterprises play an important role in the fields of shantytown renovation and old-town renovation, and financing is also relatively healthy.

"Three arrows are launched at the same time" is a comprehensive benefit to the market

A-share bottom is likely to appear

China Fund News reporter: What is the impact of the "Three arrows are launched at the same time" in the real estate industry on the overall A-shares in the recent period? Can it bring comprehensive benefits?

Li Xin: First of all, the "first arrow" is mainly used for high-quality real estate companies, the "second arrow" focuses more on private enterprises, while the "third arrow" does not have many thresholds for the application of the "third arrow". Listed real estate companies can enjoy the benefits of such policies, so the release of policy effects will be better. Secondly, the "third arrow" brings together a variety of financial policies, including restructuring, additional share issuance, private equity, etc., which have created very good opportunities for real estate companies to improve their financial situation. Finally, the "three arrows are fired at once" has produced a very good combination punch effect, which can significantly improve the liquidity of real estate companies.

Xia Haoyang: Overall, some factors that have previously suppressed economic recovery are improving marginally. The continued easing of real estate financing policies has solved the problem of runs on the debt side of real estate companies, and the control risks have further spread outward. Next, during the window period of loose financing policies, it is expected that the demand policies on the residential side will continue to be put into effect to help real estate market sales recover and solve the pressure of the downward economic downturn in the real estate market. Therefore, from many perspectives, economic recovery is a trend with strong certainty, and A-shares have also rebounded recently, reflecting the positive expectations of the capital market for economic recovery.

Zhao Dazhen: The real estate industry is the artery of China's economy. There are many industries and enterprises involved in the upstream and downstream, and the economic relationship is very close. Through the targeted release of real estate companies, it actually also transfusions to the entire industrial chain, providing more jobs, bringing a recovery of demand, which is beneficial to all industries from a fundamental perspective.

Zou Xi: The real estate industry has a "three arrows at once" and has a clear signal effect, reflecting the orientation of optimizing and adjusting policies based on actual conditions and keeping pace with the times. Based on relevant policies and measures, this is a comprehensive benefit to the market, and the large bottom of the A-share market is likely to have appeared.

Hu Yaowen: The real estate chain has an impact on commodity pricing and the entire macroeconomic. Given that the adjustment of the entire industry has entered a relatively benign stage and the policy judgment is relatively accurate, we are very confident about the improvement of the industry, and the style switching of A-shares in the future is also possible.

Value style may have continuous opportunities

China Fund News reporter: Will the market style change after real estate and banks strengthen across the board? From the perspective of layout at the end of the year and the first quarter of next year, which areas are more dominant?

Li Xin: Among these sub-sectors, we are most optimistic about real estate at present. Real estate has risen, which is also beneficial to banks and insurance.

Xia Haoyang: The market is currently in the bottoming stage. Looking at the market lows in the past few rounds, the market's focus is often on repair when the bottom rebounds, while low valuations and positive policy expectations are the main logic for market recovery. From the perspective of the relative valuation level of sub-industry, referring to the performance of the range of 30 trading days after the four market bottoms since 2010, there is a general phenomenon of industries leading the rise and rebounding at relatively low valuations. Therefore, we are still paying attention to the valuation repair opportunities of the financial real estate sector.

Zhao Dazhen: Economic expectations are upward, liquidity easing cooperation, and the increase in the density and intensity of policy density of stable growth may bring opportunities for the recovery of the style of large-scale stocks in stages. In terms of the layout of the end of the year and the first quarter of next year, the first half of next year is in the early stage of economic recovery, and the pro-cyclical sector will have more advantages over the growth sector.

Zou Xi: Market style will gradually move towards value, which is a high probability event in the next year. Although there has been a significant change in the policy direction, policy optimization is a gradual process. It is normal to grasp the strength of the policy to avoid new negative impacts. Therefore, the style change will not be achieved overnight, and there may be continuous opportunities for value styles in the next year. As for the end of the year and the first quarter of next year, high-quality companies in the real estate industry and completion chain may have better investment opportunities.

Hu Yaowen: Short-term stable growth expectations have increased, and we are more optimistic about pro-cyclical industries related to economic recovery.