JPMorgan: Mainland property stocks show "green shoots," with prospects of replicating Hong Kong's property rebound.

JPMorgan: Mainland property stocks show "green shoots," with prospects of replicating Hong Kong's property rebound.

May Day Golden Week data released: Mainland real estate secondary market transactions jumped 31% year-on-year—J.P. Morgan immediately issued a signal: this scene closely resembles the moment when Hong Kong real estate began to rise a year ago.

According to Trend Fan Trading Desk, on May 7, J.P. Morgan released a research report on the China real estate industry, authored by analyst Karl Chan's team. On the same day, HSBC also published a report titled "China Real Estate: Rebound Still in Early Stage." Both institutions rarely issued positive signals on the mainland real estate sector on the same day.

Golden Week Data: Second-hand Transactions +31% YoY, "Little Spring" Continues

Based on the real-time Iceberg Index data cited in the J.P. Morgan report, during the 5-day Labor Day holiday, 25 cities saw real-time second-hand home transactions increase 31% year-on-year, continuing April's +29% momentum.

It's worth noting this 31% refers to real-time transaction data, not online contract data (which typically lags by several weeks). By online contract data, the growth rate during Golden Week is 12%.

By city, Shenzhen and Guangzhou saw significant improvement in both new and second-hand transactions thanks to pre-holiday new policies; Shanghai maintained April's trend, with China Resources Land's "Feiyun Yuefu" project registration ratio exceeding 200%; in Beijing, the latter half of the holiday saw viewing and transactions rebound as people returned to the city; Chengdu's Jinmao Jintang project posted single-day sales of 102 million yuan on May 1.

On prices, based on the Iceberg second-hand listing price index, tier-one city home prices are seeking a bottom—Shanghai has rebounded slightly from the bottom (+1.2%), while Beijing, Guangzhou, and Shenzhen are still declining slightly but the drop has narrowed significantly.

Why Is This Rebound "Different"?

J.P. Morgan emphasized in the report that there is an intriguing aspect to this round of real estate improvement: no apparent policy-driven stimulus.

In past years, every cyclical recovery in the mainland real estate market has almost always aligned with a policy node—November 2022's "16 Measures," April 2024's "De-stocking," September 2024's "Stop the Decline and Stabilize." But this time, J.P. Morgan stated, "The latest green shoots are somewhat hard to explain, at least with no obvious driving factor."

The report suggests possible explanations include: delayed wealth effect from stock market improvement; marginal improvement in the job market; natural bottoming after home prices fell 30%-40% (reverting to 2015 levels); and the strong recovery in Hong Kong’s property market (with prices up 15% since the March 2025 low) boosting buyer confidence.

J.P. Morgan believes organic recovery is more valuable than policy stimulus—the latter historically only brings short-term effects.

Comparing to Hong Kong Stocks: Mainland Real Estate Still in "Phase One"

J.P. Morgan compares this round of mainland real estate stocks to the three-phase rebound of Hong Kong real estate stocks since April 2025.

Hong Kong property stocks' three phases are:

  • Phase One (Green Shoots Period): Up 40% in 80 days
  • Phase Two (Observation Period): About 6 months of sideways movement as the market assesses the sustainability of recovery
  • Phase Three (Confirmation Period): Another 30% rise as the market confirms the rebound is not a "dead cat bounce"

As of May 6, Hong Kong property stocks have risen about 78% since the April 2025 low. Mainland real estate stocks have risen only 22% since the early April 2026 low, with Hang Seng Index up 4% in the same period.

J.P. Morgan believes mainland real estate is still in the first "green shoots" phase. Compared to Hong Kong's first-phase 40% total rise, even with 22% already up, there is still about 20% upside potential.

If data for May and June continues to improve, the real test will come in July and August. If data remains robust then, J.P. Morgan says they'll further raise their optimism for the sector, possibly referencing Hong Kong's third phase for more than 30% additional upside.

State-owned Enterprises Lead, This Rally More "Genuine"

Another notable feature: SOEs outperform, distressed developers lag.

Since the April low, state-owned real estate stocks have averaged about 17% gains, while troubled developers (e.g., Sunac) have only risen about 2%. This is the opposite of past policy-driven rallies—previous rounds saw distressed developers average gains of 278%, SOEs only 77%.

J.P. Morgan believes this indicates the current rally is "much less speculative," attracting real funds for long-term positioning, and may usher in a "slow bull" instead of a "roller coaster."

J.P. Morgan also noted A-share real estate SOEs (Poly Developments, China Merchants Shekou) have underperformed their Hong Kong counterparts by about 15% since the last cycle high.

From a valuation perspective, SOEs' price-to-book (P/B) is currently around 0.63x. If it reverts to the historical average of 0.73x, that's about 16% upside; if it rises one standard deviation above average, that's about 39% upside.

Investor Sentiment: From "Watching" to "Entering"

J.P. Morgan describes the trajectory of investor sentiment in its report:

At the start of April, only hedge funds (HF) were actively increasing holdings, while most long-only funds (LO) remained "watchful." But in the past week or two, long-only funds from the US and Europe have started to show interest, with some investors even switching positions from Hong Kong real estate to mainland real estate.

J.P. Morgan said, "The most asked-about stock is China Resources Land, followed by COLI and Beike." Some hedge funds are even using New World Development to play the theme.

HSBC Also Speaks Out: Positioning Still Light, It's Not Too Late to Enter

HSBC's report released the same day aligns closely with J.P. Morgan's views.

Michelle Kwok, Head of Asia Property Research at HSBC, stated, "Despite the ongoing rebound, we believe it's not too late to build positions now." Analysts see this as still an early-stage rally, with even overseas investors reassessing opportunities, not simply chasing the rise.

HSBC pointed out that southbound funds continue inflowing, sector holdings are still far below historical peaks, "even China Resources Land, current holdings are still below the maximum cap, so there's no crowding risk."

HSBC raised China Resources Land's target price from HK$37.70 to HK$43.80, implying about 32% upside, maintaining a "buy" rating. Reasons include: China Resources Land newly acquired a quality plot in Shenzhen for RMB 7 billion (previously held by Shimao, reclaimed by the Shenzhen government in 2025), expected to generate over RMB 12 billion of sellable residential resources plus about 116,000 square meters of commercial complex.

HSBC also upgraded COLI and Yuexiu Property to "buy," seeing the sector's stabilization trend strengthening and risk appetite improving.

 

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