Consumption the Best Play on Real Estate Recovery
We avoid real estate stocks at all costs
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Daily Reflection on China is not published daily. So I normally don’t write every day. But the weekend news of China’s rescue plan for the real estate sector is worth noting.
The 16-point plan was jointly announced by multiple agencies within the State Council, including the PBoC (central bank) and CBIRC (financial regulator). This indicates complexity and urgency of China’s real estate problems. Real estate directly and indirectly accounts for at least 35% of the Chinese economy. Sales of the top 100 property developers declined 28.5% yoy in October, versus the 25.4% drop in September.
Let me first point out what this announcement is NOT about.
This is NOT a direct bailout of the real estate developers. This also says nothing about the billions of defaulted USD bonds of Chinese developers. We’ll get to that later.
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