M Stanley Cuts Full-Year CN Property Market Forecasts; CHINA RES LAND Preferred

Morgan Stanley issued a research report saying that weakness in China's physical property market will continue to limit developers' land bank replenishment, leading to slower construction activity. The broker lowered forecasts for several major indicators of China's property market this year, expecting weak new housing starts to weigh on real estate investment and limit new home supply over the coming quarters, keeping primary residential sales under pressure. The broker maintained its "Equalweight" view on the sector and recommended focusing on quality stocks with self-driven growth momentum, with CHINA RES LAND (01109.HK) +0.260 (+0.792%) Short selling $45.92M; Ratio 33.651% as its top pick.

M Stanley noted that in the first seven months of this year, gross floor area transacted in land sales across 300 Chinese cities tracked by China Index Academy fell 21% YoY, dragging 1H26 new housing starts down 23% YoY. Although land transaction value rebounded significantly in July, deals were concentrated only in prime sites in tier-one cities, while transaction volume still recorded a deep decline of 16% YoY. Given that residential sales may weaken in the coming months and developers remain cautious on replenishing land banks, the broker expected the land market to remain subdued and construction activity to stay weak in 2H26.

The broker lowered forecasts for this year's new housing starts area, real estate investment and primary residential sales area. Their respective YoY changes were revised from -15.5% to -19.5%, from -16.4% to -16.9%, and from -8.5% to -9.8%. This implies cumulative declines of 76%, 53% and 56%, respectively, from their 2021 peaks.

M Stanley believed leading indicators suggest the physical market will weaken further, including accelerating MoM declines in secondary home listing prices in tier-one cities, rising listing volumes in tier-two and tier-three cities, and weaker home-viewing activity in July. With limited room for policy stimulus, transactions in both primary and secondary markets are expected to remain under pressure during the traditional summer off-season, accelerating MoM declines in overall home prices, while gains in tier-one cities are expected to narrow in 3Q26. The broker forecast nationwide secondary home prices to fall about 5% YoY this year, compared with a 2% decline in 1H26.

On stock selection, the broker recommended continuing to focus on quality alpha-generating stocks, particularly companies with strong recurring income. CHINA RES LAND (01109.HK) +0.260 (+0.792%) Short selling $45.92M; Ratio 33.651% remained its top pick, while it also suggested accumulating SEAZEN HOLDINGS (601155.SH) +0.200 (+1.815%) ahead of a potential YoY improvement in retail sales in the coming months. Among pure developers, the broker believed C&D INTL GROUP (01908.HK) +0.230 (+1.575%) Short selling $3.93M; Ratio 29.082% offers the best risk-reward at current valuation levels. (ad/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-08-10 12:25.) (A Shares quote is delayed for at least 15 mins.)