Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

China Economist

Kerry Liu

Macroeconomics

<p>We conducted a study to demystify the correlation between China’s shantytown renovation and real estate prices in the third-tier cities in China. From August 2017, Chinese authorities have indicated that the shantytown renovation program would be gradually under stricter conditions for fear that the policy would inflate even more bubbles on real estate prices in Chinese third-tier cities. However, based on monthly data during May 2015 – December 2017, we found that a higher amount of pledged supplementary lending on the shantytown renovation program decelerate the growth of real estate price in the third-tier cities. It implies that the cooling down of the shantytown renovation program could mean accelerating price growth (or decelerating price drop) of real estate prices in all first-, second- and third-tier cities as a result of reducing supplies. In our view, this is completely in contrary to what investors’ belief that the price will drop or the price growth will decelerate.</p>

We conducted a study to demystify the correlation between China’s shantytown renovation and real estate prices in the third-tier cities in China. From August 2017, Chinese authorities have indicated that the shantytown renovation program would be gradually under stricter conditions for fear that the policy would inflate even more bubbles on real estate prices in Chinese third-tier cities. However, based on monthly data during May 2015 – December 2017, we found that a higher amount of pledged supplementary lending on the shantytown renovation program decelerate the growth of real estate price in the third-tier cities. It implies that the cooling down of the shantytown renovation program could mean accelerating price growth (or decelerating price drop) of real estate prices in all first-, second- and third-tier cities as a result of reducing supplies. In our view, this is completely in contrary to what investors’ belief that the price will drop or the price growth will decelerate.

MSCI AC Asia ex Japan Index (MXASJ INDEX)

China Economics: The Shantytown Mysteries