[ET Net News Agency, 10 June 2020] HSBC Global Research believes it is the right time
to capitalize on the China property sector's significant valuation divergence which has
become exaggerated post the outbreak of COVID-19.
The research house believes the market's hunt for select quality stocks with obvious
catalysts is overplayed, notably in growth stocks such as KWG (01813) and Shimao (00813),
both of which are trading at close to all-time highs.
On the other hand, investors' willingness to accept the second-tier names remains
lukewarm despite improved execution, which presents a great value proposition, HSBC said.
Against this backdrop, HSBC advocated investors focus on laggards with a turnaround
story. It noted that a few stocks have placed shares since April, including Shimao and
CIFI, both of which conducted a share placement at narrow discounts of 2.2% and 1.3%,
respectively, to professional/institutional investors. HSBC believes these two
transactions do not necessarily signify broad-based equity fund-raising for the sector.
HSBC is constructive on the laggards where depressed valuations have yet to reflect
the improved fundamentals - China Resources Land (01109), Country Garden (02007), CIFI
(00884), and Logan Property Holdings (03380). It revised its target prices and ratings for
three players in the sector as follows:

Name Target Price Rating
---------------------------------------------------------
Shimao Property (00813) HK$35.30 Buy to Hold
KWG Group (01813) HK$13.10 Buy to Hold
CIFI Holdings (00884) HK$7.30 to HK$8.60 Buy

(KL)