Townization Favoring HK Real Estate Stocks such as Evergrande, Stock Price Surging by Achieving 92.3 Billion RMB Sales in 2012

Jan 07, 2013, 10:49 ET from Sina Leju


BEIJING, Jan. 7, 2013 /PRNewswire/ -- For the real estate market of China, the difference between "urbanization" and "townization" means a market of a broader extent. It is generally believed in the industry that the future real estate market will benefit directly from the new policy of townization put forth at the 18th CPC National Congress and the tier-3 cities of boundless potentials will certainly become a focus of strategic importance for the real estate enterprises. An original report by Sina Leju follows:

At the 18th CPC National Congress, requirements were raised for expediting the plan of new "townization." The report calls for "promoting the in-depth fusion between informatization and industrialization, the positive interaction between industrialization and townization and the mutual coordination between townization and agricultural modernization." Besides, at the Central Economic Working Conference held at the end of the year, townization was further established as "a historic task in the country's modernization."

By now, "townization" has been lifted to the height of national strategy. It is learnt that the National Plan for Promoting the Healthy Development of Townization (2011-2020), which was drawn up by more than 10 ministries/commissions led by NDRC and including the Ministry of Finance, Ministry of Land and Resources and Ministry of Housing and Urban-Rural Development, covers over 20 city clusters, over 180 prefecture-level or higher cities and over 10000 towns across the country. The Plan provides development ideas and raises specific requirements for new townization.

According to the aforesaid Plan, the future construction of new urbanization in China will "depend on large cities and focus on medium- & small-size cities, and will gradually form city clusters with high radiation effect and promote harmonious development among large cities, medium- & small-size cities, and small town. Furthermore, the development of urbanization will promote the transformation from excessive expansion to quality upgrading.

According to the estimation of the NDRC, townization will attract 4 billion RMB investment in the future decade. Market analysts believe that enterprises of infrastructure and real estate will benefit from the move noticeably. According to Li Xiande and Yang Chenqing, analysts of CRIC Research Center, during the development of future new townization, the adjacency to core cities of strong economic power will bring huge development opportunities to the development of the real estate industry in small and medium-sized cities. 

Currently, the development of China's real estate features a marked difference among regions. In tier-1 and tier-2 cities, such development is steady, but the growth potential is limited. Most tier-4 cities represented by Erdos have suffered excessive development or lacked development potentials due to the serious bubbles resulting from oversupply. However, tier-3 cities are characterized by robust demand, rational market structure and huge development potentials.

It is reported that most real estate enterprises, such as Wanke and Evergrande, have begun to plan the layout on the road of townization and will become the biggest winners benefiting from the strategy of new townization. According to statistics, Wanke Real Estate has added at least 23 new land projects starting from Q3, which are mostly located in tier-2 and tier-3 cities. The performance presentation released by Evergrande yesterday shows that, in 2012, the company achieved 92.3 billion RMB of sales, 98% of which were contributed by the projects in tier-2 and tier-3 cities (mostly tier-3 cities). Yesterday, the share price of Evergrande (3333.HK) got off to a strong start and once reached 4.7 HKD, or a rise of 4.44%, before closing at 4.66HKD, 0.16 HKD higher from the closing price on the 6th, chalking up a rise of 3.56%, with a trading value of 588 million HKD and a turnover of 127 million shares. In Q4 of last year, the share price of Evergrande staged a bull run and jumped by 48.9% as of the close of trading yesterday from 3.13 HKD on October 3.  

SOURCE Sina Leju