CICC bullish on China developers as urban renewal targets 500,000 units

Chinese property developers listed in Hong Kong rose as much as 3% on Monday after CICC turned bullish on the sector, citing the State Council's urban renewal plan and improving fundamentals as catalysts for the next phase of growth.

"The current rally has been driven by three factors: improving fundamentals, policy tailwinds, and capital rotation," CICC said in a report published Monday. The broker believes the sector is in the mid-stage of a rising Beta trend, with improvements in sales volume and prices set to drive the next leg higher.

CHINA OVERSEAS (00688.HK) rose 1.98% to HKD15.93 on volume of HKD376 million, LONGFOR GROUP (00960.HK) gained 2.42% to HKD8.04, and CHINA RES LAND (01109.HK) advanced 2.6% to HKD36.24. The three developers collectively traded more than HKD1.16 billion in shares during the morning session, reflecting heightened investor interest in the property sector.

The moves followed the State Council's release of the Urban Renewal 15th Five-Year Plan on May 29, which targets the renovation of 500,000 dilapidated housing units and 115,000 old residential communities by 2030, alongside the redevelopment of 4,000 urban villages and the renovation of 365,000 kilometers of underground pipeline networks. The plan outlines six major tasks, including fostering new drivers of urban development, creating high-quality urban living spaces, and advancing the green and low-carbon transition of cities, according to the official document published by Xinhua. The plan also calls for making better use of underutilized land and introducing full life-cycle safety management systems for housing.

CICC's bullish call adds institutional weight to a sector that has been under pressure from a prolonged property downturn. The urban renewal plan offers a clear demand-side catalyst for developers with strong land banks in major Chinese cities, particularly those with exposure to urban village redevelopment and infrastructure-linked projects. CHINA OVERSEAS and CHINA RES LAND, both state-backed developers, stand to benefit from the policy push given their access to prime urban land and government-linked project pipelines. LONGFOR GROUP, a private-sector developer with a focus on Tier 1 and Tier 2 cities, stands to gain from the residential community renovation targets.

The plan's emphasis on creating high-quality urban living spaces and upgrading municipal infrastructure aligns with the operational strengths of these developers. For CHINA RES LAND, which has a significant presence in urban renewal projects across the Pearl River Delta, the policy provides a direct pipeline of development opportunities. CHINA OVERSEAS, with its strong balance sheet among state-owned developers, has the financial capacity to bid on large-scale redevelopment contracts. LONGFOR's portfolio of commercial and residential properties in major cities positions it to benefit from the broader urban upgrading initiative.

CICC said it expects the policy tailwind, combined with improving sector fundamentals, to sustain the rally, with capital rotation into the sector providing additional momentum. The broker's positive stance contrasts with the cautious outlook many investors have maintained on Chinese property during ongoing debt restructuring at several major developers, suggesting the urban renewal plan could mark a turning point for the sector's near-term trajectory. The next catalysts to watch include monthly sales data from these developers and further policy implementation details from local governments.

This article is for informational purposes only and does not constitute investment advice.