"Major Banks" JP Morgan: The relaxation of purchase restrictions in the Shanghai real estate market was already anticipated, with a preference for CHINA RES LAND, CHINA RES MIXC, and CHINA JINMAO

JP Morgan published a research report indicating that Shanghai launched a new round of housing policy incentives yesterday (25th), including relaxing home purchase restrictions for non-residents, reducing the required social security/tax certificate proof from 3 years to 1 year for areas outside the outer ring, and allowing residents with a 3-year tax certificate in areas outside the outer ring to purchase an additional unit. JP Morgan believes that the measures are not surprising and that Shanghai's relaxation is stronger than similar measures in Beijing last December. They expect that transaction volume and prices in Shanghai will stabilize in the next one to two months. However, JP Morgan does not believe that the market can expect a sustainable recovery in the domestic housing market solely based on this policy; the next city to relax policies will be Shenzhen.

JP Morgan stated that past relaxations by local governments have only slightly boosted stock prices. Before Shanghai announced the above policies, the Hong Kong stock market's mainland real estate sector had already risen about 5% in the early session, but the upward momentum weakened later, closing with a daily increase of about 2%, indicating that the market was not overly excited. JP Morgan believes that the rise was mainly due to short covering ahead of next week's "Two Sessions," although they do not expect new policies, investors typically adopt a "better safe than sorry" mentality and will cover shorts before any important government meetings.

The sector has risen 16% year-to-date, and looking ahead to the next two months, JP Morgan expects the sector to continue to fluctuate, generally maintaining resilience until the Politburo meeting at the end of April, which is the next policy window.

JP Morgan's top picks are CHINA RES LAND (01109.HK), CHINA RES MIXC (01209.HK), and CHINA JINMAO (00817.HK), but they believe that China Overseas Land & Investment (00688.HK) is likely to catch up, as its performance has been lagging. For more details on JP Morgan's ratings on domestic property stocks, please refer to another table