Dim Sum Express

A-Share Market

    Property: Relaxed down payment requirement to boost upgrading demand

    We believe provincial capitals without HPRs will benefit more from the latest relaxation of minimumdown payment requirements. As previous home price growth in non-HPR provincial capitals hasbeen limited, we expect prices in these cities to pick up substantially after upgrading demand isboosted by the new policy. However, the marginal effect of this latest policy relaxation might not beas strong as generally expected given that it is issued when sector business conditions are relativelystrong. Overall, we maintain our view that amid improving sector policies and fundamentals, keydevelopers might continue to offer excess returns on the back of improving earnings, valuation reratingsand capital operations.

    Banking: Liquidity and risk appetite declining amid bill financing regulation

    As the discounting of bank bills is included in the calculation of domestic new lending, the regulationof this business might lead to a contraction in liquidity supply, hence pressure on stock marketliquidity and market performance. That said, we believe the PBoC can effectively offset this impactthrough open market operations. While it is hard to estimate the amount of bill financing funds thathave been illicitly invested in the stock market, any confirmation of stock investment using thesefunds will add to negative market sentiment and give rise to a butterfly effect due to the related creditrisk.