Chief Analyst of Securities Macro: The holding of real estate has started to lose money

 Chief Analyst of Securities Macro: The holding of real estate has started to lose money

Real estate speculation is coming every day in the era of loss of money. Liang Zhonghua, chief Macro Analyst of China-Thailand Securities, points out in his latest research report that:

From an investment point of view, if the price of housing does not rise, or even if the price of housing rises slightly, the ownership of real estate is losing money every day. For example, the total cost of holding real estate in Shanghai is nearly 9%, while the income is less than 1.2%. At present, at least half of the cities in China are losing money on property ownership.

On the contrary, 150 million investors in A shares have made good returns in recent days.

On the evening of Friday, September 6, the central bank announced a reduction, and for the first time in four years, the general reduction + directional reduction, which released about 900 billion yuan of long-term funds. Today (September 8) morning, the S&P Dow Jones Index was officially announced to be included in the A-share list, including 147 large-cap stocks, 251 medium-cap stocks and 701 small-cap stocks. This is the Third International Index company to include A shares after MSCI and FTSE Russell. According to Merchants Securities estimates, on September 23, S&P Dow Jonesmove will bring a passive incremental capital of $1.1 billion to A shares.

It is worth mentioning that,

Since September, A shares have gained 4.89% in the five days of Shenzhen Stock Exchange Index, 3.93% in Shanghai Stock Exchange Index and 1.85% in S&P 500 Index.

According to Chinas securities brokerage report, people familiar with the situation said that in the near future, funds from the original speculation continued to enter the stock market. Recent securities margin balances of some brokerage business departments have been continuously increasing, and there has been a continuous increase of tens of millions of dollars per day in the business departments. Some of the money is the original speculation funds.

Institution: Real estate is losing money every day

According to the latest research report of China-Thailand Macro, from the perspective of asset allocation in large categories, early and large purchases in the past decade have made a lot of money. We have calculated the return on investment of various assets in China in the past ten years. Bonds take interest income into account, stocks take dividend income into account, real estate uses the index of return on investment of housing issued by China National Standard Data Corporation, and rent return into account. The results show that over the past decade, if you invest in commodities and keep them, you can only get a cumulative 30% return, 51% return on bonds, 57% return on stocks and 265% return on real estate. In fact, considering structural opportunities, house prices in many core cities have risen more than three or four times over the past decade.

If leverage is taken into account, the investment returns of speculative housing will be doubled several times. After all, few investors buy stocks with leverage, while buying houses with leverage is very common. Even if the down payment ratio is 50%, the purchase of a house has double the leverage, and the return on investment is doubled. If the down payment ratio is 30%, the leverage is higher. So buying more and more houses in the past ten years is the most correct asset allocation decision. But if house prices do not rise, then speculators are losing money every day. In Shanghai, for example, if you own a house, the annual rental income from purely residential use is only 1.6%. In the past year, Shanghais housing prices have not increased but decreased, and the capital gains are about - 0.4%. In fact, the real estate speculation loss is not limited to Shanghai. In the housing price statistics of Baicheng City, more than half of the cities have risen by less than 6% in the past year. Even in terms of 3% rent return, 5% capital cost and 4% house depreciation rate, they are losing money with houses in these cities. Moreover, the rental market in most small cities is very small, the vacancy rate of houses is high, and the rental income can be neglected. Looking forward, the policy of monetization of shed reform is gradually ebbing; after LPR reform, monetary policy has basically formed a structural relaxation pattern of collecting water in real estate and releasing water in non-real estate. In this context, the large cycle of real estate and the small cycle of policy decisions will be downward, housing prices will also have pressure to adjust. According to China-Thailand macro estimates, nearly 60% of the assets of Chinese residents are directly or indirectly allocated to the real estate sector, while the liquidity (liquidity) of real estate in small and medium-sized cities is very poor. Many second-hand houses need to be discounted before they can be sold.

So it seems that the rise in house prices has brought a lot of buoyancy. Everyone has a lot of assets on their books, but when they need to use cash, its really hard to cash in.

Institutions: A Better Choice of Stocks in Large Categories of Assets

Li Xinjun, chief investment officer of Ping An Securities, said there seemed to be no worrying shortfall in September. On the contrary, all kinds of benefits are accumulating, and the market will be on fire according to reason. And in the medium term, in the case of real estate repression, what kinds of assets are worth allocating? The stock market is undoubtedly a better choice.

Every editor noticed that A shares closed on the 6th day and then welcomed the heavy profits. According to the central bank website, in order to support the development of real economy and reduce the actual cost of social financing, the Peoples Bank of China decided to reduce the reserve ratio of financial institutions by 0.5 percentage points (excluding financial companies, financial leasing companies and automobile finance companies) on September 16, 2019.

In order to promote greater support for small and small private enterprises, an additional 1 percentage point reduction in the deposit reserve ratio for urban commercial banks operating only in provincial administrative areas was implemented twice on October 15 and November 15, with each 0.5 percentage point reduction. Relevant central bank officials said that the reduction released about 900 billion yuan of long-term funds, including a comprehensive reduction released about 800 billion yuan, directional reduction released about 100 billion yuan. China Securities Daily quoted institutional analysis that the reduction is good for the financial and real economy, and also has an inclusive effect on large assets such as stocks, bonds and so on. Specifically:

Stock market: Valuation, profit expectation and risk preference form a joint force, a new round of market will be formed. Bond market: Bond market yields are expected to fall further, possibly back to the 2016 lows, and the bond bull market is coming to an end. Exchange market: The impact of the benchmark reduction on the RMB exchange rate may be short-term and long-term, and counter-cyclical measures in the foreign exchange market are expected to intensify. Property market: patches have been made well in advance, and it is difficult for the lowered capital to enter the property market.

In their latest research report, Zhang Yulong and Luo Yongfeng, analysts of CITICs construction and investment strategy, said that according to the objectives of the National Regular Conference, the financing cost of the real economy needs to drop by 1% throughout the year. At the current valuation level of the Shanghai Stock Exchange Index from 11 to 12 times, the implied return on equity assets is between 7% and 9%. If the interest rate falls by 1%, the implied return on equity assets should be between 6% and 8%.

Valuation will increase by about 10%.

From the point of view of increasing profits, the profit increase caused by the decrease of interest rate is 15% - 20%. Reverse cyclical readjustment is reinvigorating, interest rates are still in the downward channel, and profit valuation benefits both. After the merger of interest rates, the central bank will implement the third round of benchmarking in the year. Credit easing and interest rate decline will gradually be realized, and profits will reach a bottoming point.

Institution: A shares are expected to attract hundreds of billions of foreign investors to buy

Recently, foreign investors are also using real gold and silver to express their long-term optimism for A-share market. Wind data show that in the past five trading days, 28 billion foreign investors have bought A shares through Shanghai (Shenzhen) Stock Exchange. This figure has reached nearly 150 billion yuan since this year.

Data source: Wind

The third quarter of this year also coincides with the time window for several major global indices to increase the share of A shares again:

FTSE Russell continues to increase the proportion of A shares. On August 24, FTSE Russell announced that its A-share inclusion factor in the global stock index rose from 5% to 15% as scheduled, effective before the opening of September 23. MSCI also continued to increase the proportion of A shares. In the early morning of August 8, MSCI announced the results of its quarterly index review in August, raising the inclusion factor of Chinas A shares from 10% to 15% as scheduled. The adjustment took effect after the closing of August 27. The S&P Dow Jones Index also released its list of six A-shares on September 6, raising the A-share inclusion factor to 25% at one time. The adjustment also took effect before the opening of the market on September 23. It should be pointed out that the 1 099 stocks included in this time do not include GEM stocks. The official website of the S&P Dow Jones Index said that it would not be included in the GEM for the time being, and would seek advice from market participants before it was included in the GEM.

According to Craig Lazzara, global director and managing director of S&P Dow Jones Indexs index investment strategy, there are two main criteria for the selection of listed companies.

Firstly, the free circulation market value of the company must reach 100 million US dollars; secondly, the stock has sufficient liquidity.

When we think about a stock, we look not only at the total market value, but also at how much trading volume investors actually have, Craig said.

Whether the founder of the company holds most of the shares and how many restrictions are imposed on the proportion of foreign shareholdings, these factors determine the actual number of tradable shares of listed companies.

u201d In terms of liquidity, he believes that in emerging markets, the liquidity of individual stocks should reach 10% of the market value, and in mature markets it should be 20%.

Zhang Qiyao, chief strategist at Guosheng Securities, said that the domestic market would experience simultaneous gains of the three major indices from August to September, with conservative estimates attracting a total of more than 200 billion yuan in growth.

Merchants Securities believes that, under the boost of the large indices that have been incorporated into A shares or expansion, there is still a large space for domestic and foreign capital inflows. Passive incremental funds amounted to 100 billion in August-November, which belongs to relatively determined incremental funds and plays a positive role in the liquidity of A shares. According to Southwest Securities, the three giants of MSCI, FTSE Russell and S&P Dow Jones have different ideas about NAA, but the three industries covered by A shares are comparatively similar.

The three A shares are mainly distributed in banking, non-bank finance, food and beverage, medicine, electronics and other industries. Some of the shares in the above industries are expected to be boosted.

Source: Daily Economic News Responsible Editor: Xing Haibo_NBJS8850