Wu Yajun, the billionaire co-founder of Longfor Properties, recently experienced a substantial surge in her net worth, witnessing an impressive increase of $1.1 billion. This financial windfall was triggered by Beijing’s announcement of additional support for China’s struggling property sector. Wu, who holds a net worth of $8.8 billion, retains a significant stake of over 40% in the Hong Kong-listed developer, even after stepping down as its chair last October.
The positive impact of Beijing’s support was evident as Longfor’s shares soared by up to 28% during Tuesday’s morning trading session, propelling it to the ranks of the best-performing real estate stocks. However, some analysts are sounding a note of caution, suggesting that the optimism surrounding this support might be overstated.
The policy readout from the recent top Politburo meeting outlined general pledges to boost domestic consumption and adjust real estate-related policies to ensure stable and healthy market development. Investors were particularly excited by the omission of China President Xi Jinping’s key slogan, “houses are for living in, not for speculation,” from the policy readout.
Introduced in 2016, this slogan had initiated a multiyear crackdown on excessive leverage in the real estate sector. Its removal now implies a potential signal of further easing of property restrictions, reflecting a subsiding overheating risk, according to Nomura economists.
Longfor’s prudent financial approach, marked by its avoidance of excessive borrowing, has positioned the company favorably. In contrast, other real estate giants like China Evergrande Group, led by billionaire Hui Ka Yan, are facing extensive offshore restructuring with total liabilities amounting to a staggering $335 billion. Longfor’s financial discipline has proven invaluable in navigating the challenging landscape of China’s property crackdown.
However, experts like Shen Meng, the managing director of Chanson & Co., advise caution among investors who may be expecting concrete support too soon. While Longfor and other real estate developers, such as Country Garden, witnessed a surge in their shares following the policy meeting, analysts highlight the lack of specific guidance on addressing lackluster property sales and tackling broader issues of weak demand in a struggling economy.
Nomura economists echo a similar sentiment, suggesting that while there might be some marginal easing of purchase restrictions in major cities, they do not anticipate a revival of previous stimulus measures like shantytown renovation programs.
Beijing appears to adopt a cautious outlook on China’s economic situation, acknowledging that there is no quick fix for the challenges faced by the property sector. As the situation continues to evolve, the market must carefully consider the nuances and implications of the government’s statements, while maintaining vigilance in assessing the evolving economic landscape.