JP Morgan expects increased policy support for real estate in mainland China, with a preference for CHINA RES LAND, among others

JP Morgan's research report points out that the commentary article in the latest issue of the Chinese Communist Party's official publication "Qiushi" has boosted investor hopes, suggesting that after a lack of substantial policies last year, the commentary calls for policies to be "delivered all at once, rather than using a drip-feed approach." It believes that the official discourse/tone regarding the real estate market may finally be changing this year. Given the continuous deterioration of housing prices and sales since the second half of last year, JP Morgan considers it logical for policymakers to contemplate new narratives/directions. However, it believes that this article alone is not sufficient to indicate a change in the official stance, and the next policy window is the "Two Sessions" in March and the Politburo meeting in April.

JP Morgan states that since 2021, the Chinese real estate sector has consistently underperformed the market. For this year, under the base scenario (assuming no substantial policies), JP Morgan predicts that the downward trend will continue (with sales down 7% and housing prices down 5%). However, the current market environment (especially if weak housing prices drag down consumption) increases the likelihood of more substantial policy support this year, thus there is an upside risk to JP Morgan's current forecasts.

JP Morgan's top picks are China Resources Land (01109.HK), CHINA RES MIXC (01209.HK), and CHINA JINMAO (00817.HK). In the rebound triggered by policies, it believes LONGFOR GROUP (00960.HK) offers the best risk-reward ratio