A sudden reversal in fortunes has struck China’s real estate sector, sending shockwaves through the broader market as investors reassess the risks associated with the industry. The swift downturn follows an unprecedented surge in developer shares, which had rallied by as much as 47% in a single session.
A key index tracking Chinese property firms plummeted by as much as 16% on Thursday, snapping a five-day winning streak. Companies such as Shimao Group Holdings Ltd. and Sunac China Holdings Ltd. were among the hardest hit.
The correction comes as the broader Chinese stock market rally, which had gained over 30% from its September low, begins to lose steam. Investors are increasingly taking profits, and a warning from JPMorgan Chase & Co. has added to the caution. The bank’s analysts cautioned that the sector’s valuations are demanding and that further gains may be difficult to sustain.
Despite recent efforts by authorities to support the industry, including interest-rate cuts and liquidity support, investors are growing increasingly skeptical about the magnitude of these measures. The policy easing details announced in recent weeks have failed to impress, with JPMorgan analysts noting that they are “not as strong as what some investors might have expected.”
As a result, investor sentiment towards China’s real estate sector has turned decidedly bearish. Many expect the current rally to run out of steam by mid-to-late October, and are instead turning their attention to property management stocks, which are seen as having more solid fundamentals and reasonable valuations.
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