As the recent turmoil in China’s financial markets causes global concern, JPMorgan Analyst Ryan Li has set his sights on what is perhaps the country's most-feared sector: its real estate market, reports Luke Kawa of Bloomberg Business.
The China Developers Index is down roughly 35% from its 2015 peak, and in the final two months of the year it began a stretch of marked outperformance relative to the Hang Seng China Enterprises Index. Li thinks this momentum will continue in 2016. What's more, he contends that the prospect of improving fundamentals in the real estate market means this segment warrants attention not just from traders but also from investors with a longer time horizon.
"For the first time in the past six years, the market could start looking at China Property not only from a trading perspective, but from a long-term stable demand/supply perspective," he asserts. "The sector could see a gradual but slow re-rate starting [in] 2016."
Li is in favor of reforming the Chinese household registration system, or hukou, in which a citizen's access to benefits is determined by their place of permanent residency. A little less than one fifth of China's populace lives in cities without an urban hukou, and are therefore unable to access said benefits while residing there.
In this respect, the Chinese model hearkens back to the English welfare system in the wake of the Poor Relief Act of 1662: paupers could obtain aid, but only in the parish in which they were settled.