The Zhitong Finance app learned that Huatai Securities released a research report saying that on November 17, the Central Bank, the Financial Administration, and the Securities Regulatory Commission jointly held a symposium on financial institutions. The clear support for financing by non-state-owned enterprises at this meeting of the three ministries and commissions is accurate and strong, which is expected to boost supply-side confidence, yet the virtuous cycle of the industry still needs to wait for sales to stabilize. We look forward to the continued implementation of the optimization of real estate policies and the formation of synergies with other packages of economic policies to jointly promote a positive economic recovery and stabilize residents' housing price expectations and demand for housing purchases. The bank is optimistic about cities with sufficient supply flexibility and high-quality housing enterprises with sufficient value and strong restocking capacity in mainstream cities.

The main views of Huatai Securities are as follows:

Real estate financing support is accurate and strong, optimistic about opportunities for high-quality housing enterprises

On November 17, the Central Bank, the Financial Administration, and the Securities Regulatory Commission jointly held a symposium on financial institutions. The clear support for non-state-owned enterprise financing at this meeting of the three ministries and commissions is accurate and strong, which is expected to boost supply-side confidence, yet the virtuous cycle of the industry still needs to wait for sales to stabilize. We look forward to the continued implementation of the optimization of real estate policies and the formation of synergies with other packages of economic policies to jointly promote a positive economic recovery and stabilize residents' housing price expectations and demand for housing purchases. The bank is optimistic about cities with sufficient supply flexibility and high-quality housing enterprises with sufficient value and strong restocking capacity in mainstream cities.

More comprehensive support for housing enterprises from the top down

The Central Financial Work Conference held at the end of October is the highest standard conference in the financial sector in China and has important guiding significance for the development of the financial sector. General Secretary Xi Jinping delivered an important speech at the conference, scientifically answered a series of major theoretical and practical questions on financial development. At the conference, it was clearly proposed that all parties should be treated equally to meet the reasonable financing needs of real estate enterprises with different ownership systems. This joint meeting of the three ministries and commissions was a response to and implementation of the Central Financial Work Conference, which also demonstrated greater support from the top down.

Loan support for non-state-owned housing enterprises was proposed for the first time

Since 2021, due to cash flow difficulties faced by private housing enterprises, the financial system support received by non-state housing enterprises, including banks, still needs to be improved. According to the bank's tracking, the issuance scale of 1-3Q2023 real estate domestic bonds was -8% compared to the same period, with net repayment of 12.8 billion yuan; of these, central enterprises accounted for 91% of the domestic bond issuance scale, an increase of 33 pct over the full year of 2020, achieving net financing of 97.5 billion yuan, while general private enterprises (including private, foreign, public, collective enterprises, etc.) had a net repayment of 110.3 billion yuan. However, this time, it is clearly proposed that public loans and personal mortgage loans from non-state housing enterprises should be treated equally, that loans should be avoided from the perspective of quantitative indicators, and that it is proposed to revise relevant loan methods. These measures will help strengthen credit support for non-state-owned housing enterprises in a targeted manner. In the future, attention should be paid to actual bank implementation progress.

The whitelist may be further expanded

Since 2022, the list of financial support for high-quality housing enterprises has continued to expand. According to the bank's statistics, this year, China debt has increased, and 7 new private enterprises have been added to the private enterprises that have been able to issue bonds under local state-owned assets guarantees. A total of 13 private enterprises have benefited from the “second arrow” since this year. As the white list is likely to be further expanded to 50, the bank believes that more non-state housing enterprises will benefit.

We still need to pay attention to the restoration of fundamentals under the aegis of regulation

Since 2022H2, supply-side risk has been a factor affecting the restoration of market confidence, and continued and accurate financing support is expected to improve market sentiment. However, stabilizing sales is the key to restoring the hematopoietic capacity of enterprises and for the industry to enter a healthy and virtuous cycle. Considering the extent of adjustments in market sentiment and fluctuations in residents' income expectations, it remains to be seen how long the market will react to various relaxation policies in this round. On November 1-17, '23, the cumulative transaction area of new housing in 60 cities was -22%, +14%; the cumulative transaction area of second-hand housing in 26 cities was +10%, +45%; from January 1 to November 17, '23, the cumulative transaction area of new housing in 60 cities was -12%; and the cumulative transaction area of second-hand housing in 26 cities was +25%. In terms of seashell leading indicators, the second-hand housing KMI index is 31.7 (November 17), which is the 14% ranking since 2020. Market stability still requires patience. In the future, with improvements on both the financing side and the demand side, non-state housing enterprises are expected to gradually return to normal.

Risk warning: industry policies, declining industry fundamentals, and operating risks of some housing enterprises.