In this article, we discuss 10 Chinese real estate stocks to watch as analysts predict more defaults and crises.
Chinese real estate stocks boomed in the past two decades amid rapid modernization and development in the Asian country. However, as Beijing switches focus to quality and livability of life, new construction rules have come into effect, restricting the development of new skyscrapers. The property sector in China is also witnessing a slowdown in home sales, leading to a severe crisis as several big firms go into danger of default. Evergrande, one of the first to face default risk, has stalled construction in a bid to stay afloat.
Even amid the crisis, the government is increasing curbs on the real estate sector, further hitting property firms. For example, in addition to new rules that restrict construction of tall buildings in a bid to improve urban air quality and life, the housing agency in the country has now asked developers to focus on low-rise residences. The central bank in the country has also said it will boost lending to help developers finish stalled property projects and boost demand, in a bid to decrease the woes of the property sector.
In early May, the central bank cut mortgage rates by two-tenths of a percentage point for first-home buyers. The lending pace for loans has now reached the fastest level since 2019, helping boost the fledgling market. However, unhappy home-buyers are still refusing to pay mortgages, as property firms scramble to raise cash to pay lenders. The slowdown is threatening to plunder the Chinese economy and affect prominent stocks like Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), and NIO Inc. (NYSE:NIO) in the process.
Our Methodology
The companies that are based in China and enjoy widespread popularity among real estate investors were selected for the list. The business fundamentals of these firms and the latest updates, both positive and negative, related to them are also discussed to provide some additional context. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Chinese Real Estate Stocks to Watch as Analysts Predict More Defaults and Crisis
10. Leju Holdings Limited (NYSE:LEJU)
Market Capitalization as of July 25: $28 million
Leju Holdings Limited (NYSE:LEJU) provides online to offline real estate services in China. Some of these, offered through the Leju platform, include e-commerce, online advertising, and online listing services. The company runs a host of real estate and home furnishing websites of SINA Corporation as well. The firm was founded in 2013 and is based in Beijing. The online services of the firm are complemented by discount coupons, physical property visits, marketing events, and pre-sale customer support.
On May 10, Leju Holdings Limited (NYSE:LEJU) announced that it would be changing the ADS ratio from one ADS representing one share to one ADS representing 10 shares. The change is equivalent to a 1-for-10 reverse ADS split for those who hold shares of the firm in the US.
At the end of the first quarter of 2022, 2 hedge funds in the database of Insider Monkey held stakes worth $717,000 in Leju Holdings Limited (NYSE:LEJU), compared to 3 in the preceding quarter worth $1 million.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Renaissance Technologies is a leading shareholder in Leju Holdings Limited (NYSE:LEJU), with 1 million shares worth more than $693,000.
Just like Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), and NIO Inc. (NYSE:NIO), Leju Holdings Limited (NYSE:LEJU) is one of the stocks on the radar of elite investors.
9. Xinyuan Real Estate Co., Ltd. (NYSE:XIN)
Market Capitalization as of July 25: $35 million
Xinyuan Real Estate Co., Ltd. (NYSE:XIN) engages in residential real estate development. Some of these include multi-layer apartment buildings, retail outlets, leisure and health facilities, kindergartens, schools, offices, and other commercial properties. The company also offers a host of other services related to the property sector, like landscaping engineering and management, real estate consulting and marketing, leasing management, and technical services. It was founded in 1997 and is based in Beijing.
In late March, Xinyuan Real Estate Co., Ltd. (NYSE:XIN) announced that it had signed a strategic agreement with Wanda, the largest commercial real estate firm in the world, for comprehensive and in-depth business cooperation.
At the end of the first quarter of 2022, 3 hedge funds in the database of Insider Monkey held stakes worth $146,000 in Xinyuan Real Estate Co., Ltd. (NYSE:XIN), the same as in the preceding quarter worth $120,000.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Renaissance Technologies is a leading shareholder in Xinyuan Real Estate Co., Ltd. (NYSE:XIN), with 95,300 shares worth more than $107,000.
8. X Financial (NYSE:XYF)
Market Capitalization as of July 25: $156 million
X Financial (NYSE:XYF) provides personal finance services in China. The firm basically functions as an online marketplace that connects borrowers with investors. Among a host of loans that the platform offers, such as credit loans, card loans, preferred loans to small business owners, and revolving loans, the company also offers housing loans. The housing loans function as a home equity loan product for property owners. The company was founded in 2013 and is based in the Nanshan of Shenzhen.
On May 23, X Financial (NYSE:XYF) posted earnings for the first quarter of 2022, reporting a revenue of more than $140 million, up over 1% compared to the revenue over the same period last year.
Among the hedge funds being tracked by Insider Monkey, New York-based firm Renaissance Technologies is a leading shareholder in X Financial (NYSE:XYF), with 132,375 shares worth more than $365,000.
At the end of the first quarter of 2022, 2 hedge funds in the database of Insider Monkey held stakes worth $545,000 in X Financial (NYSE:XYF), the same as in the preceding quarter worth $604,000.
7. Fanhua Inc. (NASDAQ:FANH)
Market Capitalization as of July 25: $264 million
Fanhua Inc. (NASDAQ:FANH) operates as an insurance broker. The company posted earnings for the first quarter of 2022 on May 23, reporting earnings per share of $0.12, beating analyst predictions by $0.02. The revenue over the period was more than $103 million, down close to 35% compared to the revenue over the same period last year. The firm is also trying to build a dividend profile, having paid dividends to shareholders for the past two years. In late March, it had declared a quarterly dividend of $0.15 per share, in line with previous. Fanhua Inc. (NASDAQ:FANH) provides property and casualty insurance products. The company was founded in 1998 and is based in the Guangzhou region of China. It employs over 5,700 people in the country.
At the end of the first quarter of 2022, 4 hedge funds in the database of Insider Monkey held stakes worth $1.2 million in Fanhua Inc. (NASDAQ:FANH), compared to 7 in the preceding quarter worth $2.8 million.
Among the hedge funds being tracked by Insider Monkey, Boston-based firm Arrowstreet Capital is a leading shareholder in Fanhua Inc. (NASDAQ:FANH), with 99,152 shares worth more than $722,000.
6. KE Holdings Inc. (NYSE:BEKE)
Market Capitalization as of July 25: $17.6 billion
KE Holdings Inc. (NYSE:BEKE) provides real estate services. These include existing and new home sales, home rentals, home renovation and furnishing, and other services. The firm also owns a real estate brokerage branded store named Lianjia and a franchise model for connected brokerage stores named Deyou. The firm beat market estimates on earnings per share and revenue for the first quarter of 2022 by $0.13 and $230 million respectively in late May. The firm was founded in 2001 and is based in the capital Beijing.
On July 21, Citi analyst Harry Chen initiated coverage of KE Holdings Inc. (NYSE:BEKE) stock with a Buy rating and a price target of $22.50, backing the firm to be an “early gainer from a sales turnaround” in the property sector in the coming months.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Lone Pine Capital is a leading shareholder in KE Holdings Inc. (NYSE:BEKE), with 30 million shares worth more than $622 million.
At the end of the first quarter of 2022, 34 hedge funds in the database of Insider Monkey held stakes worth $882 million in KE Holdings Inc. (NYSE:BEKE), compared to the same in the preceding quarter worth $2.3 billion.
Along with Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), and NIO Inc. (NYSE:NIO), KE Holdings Inc. (NYSE:BEKE) is one of the stocks that hedge funds are monitoring.
In its Q3 2021 investor letter, Tao Value, an asset management firm, highlighted a few stocks and KE Holdings Inc. (NYSE:BEKE) was one of them. Here is what the fund said:
“As witnessed in the past quarter, the government intervention in Chinese private sector is elevated to an unprecedented level. Given this background, I thoroughly reviewed all our Chinese holdings and made a few changes. We exited KE Holdings Inc. (NYSE:BEKE), for high potential regulatory risk and the passing of the visionary founder & CEO Zuo Hui (who was a core tenet of our original thesis).”
5. China Evergrande Group (OTC:EGRNF)
Market Capitalization as of July 25: $2.7 billion
China Evergrande Group (OTC:EGRNF) is an investment holding firm that primarily engages in the property development business. The firm has interests in the development of residential properties, property investment, management, and construction, as well as a host of other businesses like new energy vehicles, hotel operations, and finance. In late May, news agency Reuters reported that the firm was considering a deal to pay $19 billion in offshore public bonds with cash installments and equity through the sale of two Hong Kong-listed units of the firm.
China Evergrande Group (OTC:EGRNF) shares have tanked this year as the sales of homes fall drastically, leading to several missed payments on bonds. The firm is in default with $22.7 billion of offshore debt that includes loans and private bonds.
4. Country Garden Holdings Company Limited (OTC:CTRYF)
Market Capitalization as of July 25: $9.5 billion
Country Garden Holdings Company Limited (OTC:CTRYF) is an investment holding firm that engages in the development and construction of real estate properties, mostly in China. The firm develops properties like townhouses, condominiums, car parks, and retail shops. It also builds and runs hotels. The firm has interests in an array of other businesses as well, like robots, electronic hardware, and food. The firm was founded in 1992 and is based in Foshan. It employs over 150,000 people.
Country Garden Holdings Company Limited (OTC:CTRYF) posted a revenue of over RMB82 billion last year, up from RMB70 billion in the previous year. The shares have dropped by over 60% so far this year amid a crisis in the property sector.
3. China Vanke Co., Ltd. (OTC:CHVKF)
Market Capitalization as of July 25: $28 billion
China Vanke Co., Ltd. (OTC:CHVKF) engages in the development and sale of properties. The firm develops and sells residential buildings, commercial offices, and ancillary facilities. It also has interests in the hotel and resort, education, and housing rental businesses. The firm was founded in 1984 and is based in the Yantian region of Shenzhen. It employs more than 139,000 people in mainland China. In addition to the property sector, the firm also engages in the logistics and warehousing business.
Late last year, amid the default of Evergrande, one of the largest property developers in China, the Chinese government had asked state-backed property firms like China Vanke Co., Ltd. (OTC:CHVKF) to buy some of the assets of the former.
2. China Construction Bank Corporation (OTC:CICHY)
Market Capitalization as of July 25: $160 billion
China Construction Bank Corporation (OTC:CICHY) provides banking and related financial services. Some of these include personal business, car, and housing loans. The company was founded in 1954 and is headquartered in Beijing. The firm runs more than 14,000 banking outlets in China and employs over 375,000 people. In late March, the firm posted earnings for the fiscal year, reporting earnings per share of RMB1.19 and a revenue of RMB605 billion, up more than 5% compared to the revenue over the same period last year.
China Construction Bank Corporation (OTC:CICHY) shares have been buoyed in recent weeks after the Chinese government announced plans to cut benchmark for mortgage rates. The firm has a forward dividend yield of 8.55%.
1. China Merchants Bank Co., Ltd. (OTC:CIHKY)
Market Capitalization as of July 25: $133 billion
China Merchants Bank Co., Ltd. (OTC:CIHKY) operates as a banking firm. Some of the loans it offers include personal, commercial real estate, consumption, housing, and car loans. The firm was founded in 1987 and is based in the Futian region of Shenzhen. It employs more than 100,000 people. The company owns and runs over 140 bank branches, 1,770 sub-branches, 2,812 self-service centers, 6,592 self-service machines, and 14,746 visual counters in China. It has a forward dividend yield of 4.21%.
China Merchants Bank Co., Ltd. (OTC:CIHKY) posted a revenue of over $41 billion in 2021, up from $34 billion in 2020. The company has offices in Hong Kong, New York, London, Singapore, Luxembourg, Sydney, and Taipei, in addition to China.
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Disclosure. None. 10 Chinese Real Estate Stocks to Watch as Analysts Predict More Defaults and Crisis is originally published on Insider Monkey.
