Stocks of mainland real estate companies are being dumped.
Real estate stocks on the mainland have been falling recently, and the closing price on April 26 shows that of the 34 real estate companies with market capitalization of over RMB 20 billion in A and H shares, a total of 22 (65%) have a P/N ratio of less than 1. Sales giants such as Beyoncé, Sunac and China Overseas Land & Investment Ltd. have broken the net ratio (when the market price of a stock is lower than the net asset value per share, it is called “broken net”).
After a sluggish year in 2020, real estate stocks have turned red this year, with the real estate sector as a whole soaring on Feb. 25 and nearly 20 A-share real estate companies stopping, Firstrade reported on April 27.
Just when investors thought real estate stocks were finally going to climb from the bottom, the plate turned down the day after that and has not stopped its decline until now. Data show that as of the close of business on April 26, the Shanghai real estate index was 6240 points, has fallen back to the level before the February 25 surge, lower than the 6291 points on February 24.
Shanxi securities data show that as of April 23, the real estate sector dynamic PE of 8.2 times, in the last 10 years at a lower level, real estate in the capital market is in the “ice age”.
The stockholders lamented that every red turn is an opportunity to liquidate their positions.
Some stockholders also said on April 26 in an investment forum: “Real estate stocks are really deep.”
Specifically, as of the close of business on April 26, the share prices of Wonderful Property and Huaxia Happiness fell by as much as 53.09% and 50.97% respectively during the year; Yuzhou Group, Capital Land Co. and Taihe Group fell by 22.50%, 22.14% and 18.65% respectively during the period.
The industry giants were not spared either. This year, shares of Bi Gui Yuan have fallen by 12.41%, China Evergrande Group by 9.53%, Vanke A by 3.48%, Poly Development Holdings Group by 11.50% and China Merchants Shekou by 11.89%.
From the performance of the P/N ratio, many real estate companies have broken the net, and some of them are on the way to break the net even if they are not broken at present. As of the close of business on April 26, the P/N ratio of China Overseas Development was only 0.68, that of Cinnamon Garden was 0.99, that of Sunac China was 0.97, and that of Poly Real Estate and China Evergrande was 1.05 and 1.03, respectively, which were close to the net-breaking “cliff”.
Lu Wenxi, chief analyst of Centaline Real Estate, said that since this year, property market regulation and control measures have been launched around the world, and some changes in market expectations have taken place, and the overall real estate stocks are really not good.
Shanxi Securities statistics show that from April 19 to April 23 week, the real estate sector net outflow of funds 4.65 billion yuan RMB.
The proportion of fund positions also continued to decrease. According to data from Ping An of China Research Report, at the end of the first quarter of 2021, the fund’s real estate sector position accounted for 1.68%, down 0.09 percentage points from the end of 2020, down for five consecutive quarters, and already at its lowest level since statistics became available in 2013, with an underweight of 1.07 percentage points relative to the standard sector allocation ratio.
As for the reason why real estate stocks were sold off by the market, the report said it was mainly because the performance of several real estate leaders did not meet expectations.
On April 22, Vanke released a quarterly report with a gross margin of 16.1% on revenue from real estate development and related asset operations, down 6.5 percentage points from the full year of 2020. Vanke’s performance reflects the general plight of the industry on a large level.
Lu Wenxi said this: “Last year, the overall property market sales data is good, but on the other hand, large enterprises are increasing revenue without increasing profits, this phenomenon is becoming more and more obvious, how can market expectations be good?” And speculation is the future expectations, but real estate profit margins are returning to manufacturing levels, there is not much room for imagination.
Kerry data show that in 2020 in 66 industry typical listed real estate enterprises, the vast majority of enterprises profit margin level is different degrees of downward. Among them, gross margin and net attributable margin downward real estate enterprises reached 62 and 51, respectively, and the gross margin and net attributable margin double down real estate enterprises reached 47, accounting for more than 70%.
A brokerage analyst said: “The current valuation of the real estate sector is at the bottom of history, pessimistic expectations are showing. Behind the low valuation also reflects the market’s concern about real estate.” Since last year, the real estate enterprises debt explosion incident after incident, mapping out the risk factors of the industry. On the other hand, with the trend of commodity housing sales topping out, where will the profits of real estate companies come from in the future?
And commentator Wen Xiaogang believes that the market has lost confidence in real estate mainly or the Chinese Communist Party authorities have continued to launch regulation of the property market this year, and mortgage interest rates will be raised, but also strict investigation of consumer loans into the property market, Shenzhen and other cities have also launched the property market guide price, etc., the use of administrative means to suppress the property market. All these have caused the market to believe that the mainland property market will enter a low point under the CCP’s suppression, so it is not surprising that the share prices of real estate companies have fallen.
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