According to "The Big Bank," Bank of America Securities expects policy expectations to provide strong support for the mainland housing market, with China Overseas Land & Investment as the top pick

Bank of America Securities' research report indicates that the financial reports of China's real estate industry in the first half of this year are expected to be weak (reflecting a decline in housing prices over the past four years), but the bank sees two bright spots, including a stabilization of profit margins on a half-year basis, and some top developers like China Overseas (00688.HK) and C&D International (01908.HK) are more confident about profit margin improvements; some management teams are more optimistic about the central government's further supportive policies than expected.

On the other hand, the contract sales performance of the top 100 developers before August was weak, down 22% year-on-year. If sales do not rebound significantly, the fourth quarter will face a more severe comparative base, and if first-hand housing prices weaken further, the improvement in profit margins may dissipate.

Bank of America Securities believes that in the next month, policy expectations may provide good support for the industry, but more decisive policies are needed to break through the trading range; the bank has raised its forecasts for China Overseas and C&D International, and correspondingly increased their target prices by 5% and 2%, respectively, given the solid fundamentals, listing them as industry favorites. The bank maintains a "Underperform" rating on Vanke (02202.HK) and China Jinmao (00817.HK) due to their poor financial outlook.

In the report covering Chinese real estate developers by Bank of America Securities, core profits are expected to decline by about 50% in the first half of 2025, except for C&D International and Binjiang Group (002244.SZ), which are expected to achieve year-on-year profit growth. The average gross profit margin is 15%, remaining stable on a half-year basis (although still declining year-on-year), as low-cost inventory acquired in 2022 begins to enter the accounting pipeline. Borrowing rates have significantly decreased across the board.

The bank has raised its forecasts for China Resources Land (01109.HK) and C&D International, but due to the performance in the first half of 2025, it has lowered the 2025 fiscal year forecast for Longfor Group (00960.HK) (specific ratings and target prices can be found in another table)