The real estate sector rose strongly, and the two departments issued a document to encourage the merger and reorganization of high-quality projects of dilapidated enterprises.

Boosted by policy news, the real estate sector rose in intraday trading on the 20th. At the close, Jinbin Development, Chongqing Development, Zhongzhou Holdings, Dalong Real Estate, Jingneng Real Estate, Jiakaicheng, Caixin Development, Tianbao Infrastructure, Blu-ray Development and Taihe Group all had daily limit, while Tian Fang Development and Shenfang A rose by over 9%. It is worth noting that Chongqing Development, Dalong Real Estate and Blu-ray Development have been trading daily for four consecutive trading days.

In the news, recently, the People's Bank of China and China Banking and Insurance Regulatory Commission jointly issued the Notice on Providing Financial Services for Risk Disposal Projects of Major Real Estate Enterprises, encouraging banking financial institutions to provide financial support and services for risk disposal projects of major real estate enterprises. The notice mainly focuses on six aspects, including: carrying out M&A loan business safely and orderly, increasing bond financing support, actively providing M&A financing consulting services, improving M&A service efficiency, doing a good job in risk management, and establishing a reporting system and publicity mechanism.

The circular stressed that banking financial institutions should carry out M&A loan business in a safe and orderly manner, and carry out M&A loan business for real estate projects in a safe and orderly manner in accordance with the principles of legal compliance, controllable risks and sustainable business. Focus on supporting high-quality real estate enterprises to merge and acquire some high-quality projects of large real estate enterprises with risks and operational difficulties.

The Shanghai Stock Exchange reported that a person close to the regulatory authorities told reporters that there are several aspects worthy of attention: the main body of mergers and acquisitions is high-quality real estate enterprises, including large private, state-owned and central enterprises. The object of M&A is high-quality projects, not the familiar corporate equity. Through the merger and acquisition of real estate projects, we can "slim down" some high-quality real estate enterprises that are not on the verge of bankruptcy and prevent and resolve risks.

The source also said that some banks had previously intended to issue M&A loans to enterprises that acquired high-quality real estate projects, but because the specific operating rules, supervision direction and requirements were not clear, they had some concerns in the specific implementation process. One of the main purposes of this notice is to dispel this concern in the market.

Related work has been actively deployed and promoted. It is reported that the central bank and the State-owned Assets Supervision and Administration Commission have recently held a meeting to guide high-quality entities to do a good job in project mergers and acquisitions in accordance with the principle of marketization. In addition, the central bank and China Banking and Insurance Regulatory Commission recently held a meeting on the healthy and orderly development of M&A loan business, and some major banks attended the meeting. The meeting also demanded that banks should not blindly recover loans from large real estate enterprises with risks and operational difficulties.

Prior to this, the Dealers Association held a forum for representatives of real estate enterprises, saying that it would give priority to supporting enterprises that meet the real estate control policies to register debt financing instruments for M&A projects or projects that have been sold or under construction. Enterprises such as China Merchants Shekou recently plan to register and issue debt financing instruments in the inter-bank market to finance real estate mergers and acquisitions.

Galaxy Securities pointed out that at present, in the combination of "fundamental bottom" and "policy bottom", the policy has gradually shifted from the credit side to the demand side. The key factors that suppressed the valuation before have been released, and the real estate sector is currently "low valuation, low position and high dividend". Features have sufficient margin of safety and flexibility, and the fourth quarter of this year to the first quarter of next year is the best window period for configuration. In the medium and long term, under the expectation of increased concentration and stable profits, the "three good housing enterprises" with excellent management, smooth financing and diversified development will enjoy a higher valuation premium.

CITIC Securities believes that under the rational and pragmatic policy attitude, 2022 will usher in a new starting point for the industry. Previously, the market may be overly pessimistic about real estate sales, delivery and development investment, and industrial chain companies without bad debts (excellent accounts receivable management ability or directly facing C-end) may be significantly underestimated. We are optimistic about the shell (Baker. N), using new means such as digitalization to promote the upgrading of traditional industries, and the stock price has been greatly adjusted in the short term due to the sharp drop in GTV of housing transactions; We are optimistic about the blue-chip enterprises in property management that have been wrongly killed due to real estate credit and bad money corporate governance, and recommend Poly Property, China Resources Vientiane Life, Country Garden Service, Sunac Service, China Merchants Scratch and Jinke Service; We are also optimistic about the steady development of real estate development companies, including Poly Development, Vanke A, Jindi, Longhu Group, China Merchants Shekou and Country Garden.