ed-TH / sa- AH More cooling measures in hot cities • Sales by listed developers remained strong in August, but some developers may pace new launches towards year-end • Xiamen, Suzhou, Wuhan and Hefei announced cooling measures recently; more hotspot cities (e.g. Hangzhou and Zhengzhou) may follow suit in coming months • Property destocking continues despite more tightening policies • Top picks: COLI, CR Land for their sustainable sales growth and limited placement risks. More hotspot cities launched cooling measures, but inventory still improving. Residential new starts in August declined further by 11% m-o-m to 94.6m sm (vs June/July’s 126.7m sm and 106.7m sm), the lowest month since April. Meanwhile, completed unsold inventory continued to improve by 1.5% m-o-m to 425m sm (or four months of sales). With the diverged market situation between hotspot cities and lower tier cities, we believe more hotspot cities will launch tightening measures while lower tier cities will continue to destock with liquidity spilled over from hotspot cities. While Suzhou, Wuhan and Hefei tightened mortgage requirement in August, Xiamen resumed home purchase restrictions for third home buyers who is buying residential units below 144sm. Land transactions continued to grow (i.e. +7.9% y-o-y to Rmb463bn in 8M16). In order to cool the land and residential markets, we believe more hotspot cities (e.g. Hangzhou, Zhengzhou) may follow suit to tighten in the coming months. Listed developers achieved strong sales lock-in and may pace new launches in 4Q. National property sales growth in 8M16 continued to slow to 40% y-o-y (vs June/July’s 44%/41%) and is expected to slow down further in 4Q16. National ASP, however, remained stable at 12% above 2015’s level. Twenty-seven listed developers continued to gain market share (to 24% vs 2015’s 23%) as August sales picked up by 10% m-o-m (vs national sales’ +4%). In 8M16, the average monthly sales of major developers was 59% higher y-o-y and 38% higher than 2015 average. Although some developers had raised their sales targets in August, sales lock-in was high at 74% (vs 8M15’s 58%). As such, we believe some developers with high sales lock-in, like Greentown, CIFI and Yanlord, may pace new launches for the rest of the year for better margins and 2017 sales growth. Focus on developers with solid fundamentals and sustainable sales growth. The sector is trading at 6.9x FY17 PE which is fair given concerns over share placement and policy tightening. However, we believe large-cap or high-yield property developers will remain favoured by the insurance capital from HK-SH connect. We like COLI and CR Land for their decent sales outlook, supported by quality land banks, and limited placement risks. HSI: 23,216 ANALYST Andy YEE · (852) 2971 1773· andy_yee@hk.dbsvickers.com Danielle WANG, CFA (852) 2820 4915· danielle_wang @hk.dbsvickers.com Carol WU · (852) 2863 8841· carol_wu@hk.dbsvickers.com Ken HE, CFA +86 21 6888 3375 ken_he@hk.dbsvickers.com Trista QIN + 852 2863 8820 trista_qin@hk.dbsvickers.com Top picks F Y17FPEHK$HK$US$bnxChina Ov erseas(688 HK)25.9531.60BUY33.07.1CR L an d(1109 HK)21.7529.65BUY19.48.2Co mp an yPric eMktCapRecTargetPrice Source: Thomson Reuters, DBS Vickers DBS Group Research . Equity 13 Sep 2016 China / Hong Kong Industry Focus China Property Sector Refer to important disclosures at the end of this report Industry Focus China Property Sector Page 2 Developers' average monthly sales growth RMB Mn8M168M1520158M16 v s8M158M16 v s2015Country Garden22,4298,923 11,680151%92%Ev ergrande29,13114,690 16,77898%74%V anke29,69119,506 21,78952%36%Poly CN17,17012,264 12,84240%34%COLI^13,40310,739 12,04225%11%Av erage22,36513,22415,02669%49%Sunac9,2684,706 5,68597%63%Longfor7,0093,765 4,54586%54%CR Land8,9057,074 7,09626%25%Greentown7,5884,988 5,99252%27%Shimao5,5974,974 5,58713%0%Av erage7,6735,1015,78150%33%CIF I4,5381,785 2,518154%80%Agile4,4813,326 3,69235%21%R&F4,9943,648 4,53137%10%Sino-Ocean3,5732,353 3,37652%6%Av erage4,3962,7783,52958%25%Yuzhou2,118975 1,168117%81%SZI1,9471,570 1,33224%46%Shui On Land^2,4501,371 1,79379%37%F antasia1,069885 93921%14%Central China1,6361,075 1,31252%25%Poly HK2,8752,525 2,50014%15%KWG1,8841,562 1,68321%12%Yanlord2,6101,988 2,42331%8%COGO^1,5741,336 1,46718%7%China J inmao2,6461,811 2,31746%14%Beijing Capital Land3,1752,004 2,70958%17%Powerlong1,2561,110 1,19213%5%Greenland HK1,4501,0281,44941%0%Av erage2,0851,5111,74038%20%Sector av erage7,0344,4255,09059%38%Dev elopers with monthly sales Rmb3bn - Rmb5bnDev elopers with monthly sales below Rmb3bnDev elopers with monthly sales abov e Rmb10bnDev elopers with monthly sales Rmb5bn - Rmb10bn ^ Exchange rate: 1.25 HK$/Rmb in 2015; 1.2 HK$/Rmb in 2016