The Wolf of Wall Street is bottoming out on China's real estate market

On August 29th, the Hong Kong real estate sector saw a significant rise. As of the close, R&F Real Estate and Greenland Hong Kong rose more than 18%, Rongchuang China rose more than 12%, and Longguang Group rose more than 9%. From the perspective of trading positions, the appearance of multiple foreign brokers in the net buying positions of domestic real estate stocks in Hong Kong may indicate that the "wolves of Wall Street" are buying on dips. According to data from the Hong Kong Stock Exchange, JPMorgan Chase quickly bottomed out 170 million shares of Country Garden on the eve of the real estate policy adjustment.

In addition to buying stocks and bonds in the secondary market, foreign investors tend to bargain on real estate assets in popular areas of core first and second tier cities. According to data from Kerui, since last year, institutions such as Kerry Construction, Hong Kong Land, and Kai De Group have made project acquisitions in the mainland real estate market.

Foreign investment may attract domestic real estate stocks on dips

On August 29th, from the perspective of trading positions, multiple foreign brokers appeared in the net buying positions of domestic real estate stocks in the Hong Kong stock market.

Taking Rongchuang China as an example, as of the close, the top 5 brokers with the highest net buying positions were Yingtou Securities, UBS, Goldman Sachs, Morgan Stanley, and Bank of China International, while the top 5 brokers with the highest net selling positions were CITIC Lyon, Yaocai, CICC, Futu Securities, and Shenwan Hongyuan.

"The Hong Kong stock market is mainly an offshore market. The funds purchased from foreign seats in the Hong Kong stock market are generally foreign funds." A brokerage business representative from a large domestic securities firm in Hong Kong said, "However, the Hong Kong stock market does not have a penetration mechanism, and it is not clear who is buying from real-time seats."

JPMorgan Chase's "Pinpoint" Bottom Hunt for Country Garden

Listed real estate companies face favorable financing opportunities. On August 27th, the China Securities Regulatory Commission issued multiple policy measures, involving IPO and refinancing rhythms, share reduction, margin trading, and securities lending. Among them, it is specifically proposed for the real estate industry that "the refinancing of real estate listed companies is not subject to restrictions on breakdowns, net losses, and losses.".

JPMorgan Chase almost grabbed the bottom of Country Garden before the adjustment of favorable real estate policies. According to data from the Hong Kong Stock Exchange, JPMorgan Chase increased its holdings of 171 million shares of Country Garden on August 14th, involving approximately HKD 144 million. After the increase in holdings, JPMorgan Chase's latest positive position in Country Garden was 1.394 billion shares, with the proportion of positive positions increasing from 4.42% to 5.04%.

This move is believed to be JPMorgan Chase's purchase of core assets in domestic housing stocks at a low price. The average price bought by JPMorgan Chase was HKD 0.84 per share. At the close of August 29th, Country Garden's stock price was HKD 0.91 per share, and this transaction has generated a floating profit. From the publicly disclosed books alone, its stock price has seriously fallen below the net asset price. At present, the net assets of Country Garden have fallen to the price of cabbage, with a price to book ratio of only 0.11 times.

"That is to say, for an asset worth 100 yuan, you can buy it for 11 yuan," said an industry insider. However, some market insiders have analyzed from a cautious perspective that although professional institutions have bought, there may be hedging measures. At this point in time, bottoming out has been impossible since other real estate stocks broke through, and general investors need to pay attention to the risks involved.

However, JPMorgan Chase's operations in the domestic real estate sector are mostly short-term trading. Taking Country Garden Services as an example, JPMorgan Chase frequently traded between August 2nd and August 15th, with a newly held position of 152 million shares, accounting for 4.5% of the total issued share capital. On August 1st, JPMorgan Chase held 221 million shares in the good position of Country Garden Services.

"Under the background of the Federal Reserve's interest rate hike, financing costs have risen, so European and American institutions are pursuing higher returns in the stock market and may be more interested in low-priced assets. With the recovery of China's real estate market, some stocks have oversold, which may trigger foreign investors to bargain," said a private equity fund manager in Shenzhen.

According to incomplete statistics from Zhuge Data Research Center, in the past two years, many foreign companies, including BlackRock, Goldman Sachs, Marathon Capital, Oak Capital, and others, have been targeting the stocks and bonds of mainland real estate companies, with risky real estate companies being their main targets.

Analysts Cao Xute and Zhai Suning from Shengang Securities previously reported that the debt risk of real estate companies has approached the red line of policies, and the expectation of policy intervention is strengthening. The institution expects that the demand for improved housing in some high-energy cities will first warm up and gradually convey confidence to the market, driving market recovery.

Foreign investors are betting on real estate potential projects

In addition to buying stocks and bonds in the secondary market, foreign investors tend to sell real estate assets in popular areas of core first and second tier cities.

In 2022, a report released by Kerui Real Estate showed that multiple institutions such as Kerry Construction, Hong Kong Land, Yishang Redwood, and Kaide Group had made project acquisitions in the mainland real estate market that year. According to data disclosed at the time, the total amount exceeded 28.3 billion yuan.

In the first half of this year, foreign investment once again targeted the Shenzhen real estate market.

On May 23rd, Tieshimen announced the establishment of a joint venture with Huisheng International, a member of the Star Lion Real Estate Group, to acquire some long-term rental apartments in Shenzhen Shenrun Building, with a total investment of approximately RMB 717 million.

According to data, Tieshimen is a world-renowned real estate developer, operator, and fund management company engaged in the development of office buildings, large-scale urban complexes, and high-end residential properties in countries such as the United States, Brazil, India, and Germany. Huisheng International is an investor and operator of serviced apartments and high-end rental apartments, and this investment renovation can be said to have complementary advantages.

Chen Xiao, senior analyst at Zhuge Data Research Center, said that in the past few years, long-term rental apartment institutions faced a crisis, but now they have regained the favor of foreign investment. On the one hand, this is related to the increased policy support for the domestic rental industry; On the other hand, from an investment perspective, long-term rental apartments have stable returns and strong resistance to cycles.