CONTINUED.............Urbanisation will remain a pillar of growth for China over the next two decades as it pushes to increase its urbanisation rate to 70% from the current 52%. In the near term, this will sustain the current high levels of fixed asset investment, particularly in housing and infrastructure. In the longer term, urbanisation will drive the rebalancing of the economy to a more consumer-centric one.
Much is being done to ready the Tier 3 and Tier 4 cities to absorb new residents. Most important among them is job creation by attracting appropriate industries. Examples include the creation of resource-based industrial parks in Hohhot and consumer goods manufacturing hubs in Hefei. Local governments are also increasing the rollout of affordable housing while enhancing transportation and social infrastructure.
But this process is not risk free. More central coordination is necessary to prevent local governments from competing against each other in expanding industrial parks catering to similar industries. In addition, local governments have to be particularly mindful in zoning land for commercial development to prevent the kind of overcapacity seen in some Tier 2 cities like Chengdu and Shenyang.
Homebuilders wanting to capture the full benefits of this trend will need to cater to the immediate needs in the smaller cities, particularly by making their offerings affordable to lower-income groups in these cities. They also need to be mindful that not all Tier 3 and 4 cities will benefit from this drive, and not all successful cities will be identifiable until several years into the process.
Nov 18 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings says that China's decision to remove the household registry system, or hukou, in phases beginning with smaller cities will likely redirect urbanisation to select Tier 3 and Tier 4 cities. This will relieve some of the social challenges faced by larger cities, including rising property prices, clogged transportation and social infrastructure and, more visibly, poor air and water quality.
Fitch believes that the redirection will need to be done in an orderly manner to minimise the risk of replicating these stresses in the new growth cities. If successful, this process will gradually benefit homebuilders that focus on smaller cities, like China Overseas Grand Oceans Group Limited ('BBB'/Stable), Country Garden Holdings Company Limited and Evergrande Real Estate Group Limited ('BB'/Stable).
Point 23 of the detailed plan on policy changes, which was announced following the end of the third plenary session of the Communist Party of China last week, proposes a phased removal of the hukou system, beginning with prefectural-level towns. The announcement emphasises the need to maintain existing restrictions on large cities to control their scale.
The Chinese government needs to redirect urbanisation away from Tier 1 and Tier 2 cities to mitigate rising challenges to social stability in these cities. Key among these challenges is the stubbornly high home prices despite the implementation of tight home purchase restrictions. In addition, many of these cities are experiencing transportation and other infrastructure bottlenecks that will take time to be resolved. More worryingly, the growing middle class is less willing to tolerate worsening air and water quality, exemplified by the highly-publicised smog event in Harbin in October.
Chinese house prices continue to surge
Prices for new homes in China's four main cities continued to soar in October, strengthening concerns about a property bubble in the country - although apparently not at Moody's.
Prices increased in 69 of the 70 cities tracked by the government, with sales surging 33% in the first 10 months of the year.
Moody's described the sales growth as "moderate" and the outlook for the property sector as stable.
The data follows Friday's release of the details of a comprehensive reform program in which the Communist Party plans to let the market play a "decisive" role in the economy. That, say Barclays analysts, indicates that property market regulation will shift to the supply side from the demand side, which hasn't been particularly successful in curbing demand.
China's reform plan boosts stocks
Asian shares mostly rise following the release of China's economic reform plan on Friday, with Hong Kong-listed Chinese shares jumping 5.7%, the Shanghai Composite 2.9%, and the Hang Seng 2.7%.
Analysts at ANZ called the program "the biggest freeing up of China's economic policy since the 1990s." If implemented successfully, it would "substantially reduce the downside risks to China's economy."
New home prices in China’s four major cities rose the most since January 2011, raising concerns of a bubble as homebuyers were emboldened by a lack of new nationwide property curbs.
New home prices in October jumped 21 percent from a year earlier in the southern city of Guangzhou and 20 percent in nearby Shenzhen, 18 percent in Shanghai and 16 percent in Beijing, the National Bureau of Statistics said in a statement today. Prices rose in 69 of the 70 cities tracked by the government.
It was 3,000,000 shares and then another 1,000,000 went off a short time later. I think it is obvious some funds took their profits. Let's hope they are done with it and they got everything out of their system Friday.
Still waiting on word from Deutsche and Credit Suisse.
Right, bab, most of the press is out, and it so far has been all good with respect to what they want to do with their economy. Keep it quiet though, sh-h-h-h-h-h., nothing said about RE which means they may lay off for another couple quarters. If they can get housing built in sufficient numbers it can take some of the pricing pressure off.
On the road today, so missed that. This is a flat out record in volume. Obviously some tutes and fundies taking profits. But wowowowowow. The playing table has changed for this stock. Still waiting on several other firms, Deutsche, CS, et al., to put out their PT's. Not sure we will get another 17 but I bet at least 15, AT LEAST, I say.....
So it takes CS a week or more after earnings to rate a stock, at least that is the case with SFUN. Note that CITI gave SFUN a PT of 71.
Credit Suisse has set a PT of $87, 35% above SouFun's (SFUN +1.1%) current trading price.
The Chinese real estate site is up 158% YTD. Shares sold off last week following the company's Q3 beat, but quickly bounced with the help of a bullish Citi note.
Yahoo is messed up. Recently not only has it been hard to get to the boards but any time you open up a finance article it freezes your computer up.
bab, read the CTC CC notes. they had to defer some revenue....another chinese realtor, might be a good buy before next earnings....other than that it does not trade much. they do prev owned homes mostly in beijiing...might be a speculative buy a couple months from now based on this def revenue
Own SFUN calls. These Ecommerce initiatives are bolstering bottom lines like you cannot believe. Basically fixed costs and the customers keep rolling in. Basically they have become Internet companies now, ala Baidu, Qihoo, etc....not in a complete sense but partial, or mostly, even.
Lots of deferred revenue here that should have been accounted for this Q, thus the reason for the shortfall. Next Q should have good numbers. 55M renimbi deferred I think roughly that is like 9 mil USD. Next Q should be a good one, as should the one following as well cause some of that is deferred two quarters.
I just asked IR to promote the Ecommerce numbers a bit more, for example, when they reach 10,000 members or any milestone, whatever the number would be. Get the word out there!