Hello friends.
I am making a huge investment into Chinese real estate equities with half my networth. My plan is to hold this for at very least a year, and realize a long term gain. I am expecting to make a 100% gain on this investment within 1-2 years. That's my base case, anyway. Things could go differently of course. Since it's an investment, I don't have plans to sell out if prices drop, unless there is something that changes more fundamentally with this market.
I am going to make a bullet point list here of my best arguments for being long Chinese real estate and some screen shots to back each part up.
Extreme stimulus from the PBOC is being pushed into markets, with Chinese money supply up 10% this year. Cuts on stamp duty taxes, explicit market-supportive statements from high officials, cuts in interest rates, and cuts in bank reserve rates all support the idea that China is easing hard and wants to push markets up.
https://prnt.sc/3nQymVM96zKU
Record panic not seen in over a decade was witnessed at the start of last September, with around 10% of ALL western finance articles being bearish on China, and every other instance of similar panic has led to great returns in the medium to long term
https://prnt.sc/7DpM9P_VJNUy
Chinese real estate equities are at the lowest valuations in history, with P/B ratios floating around 0.5 and P/E ratios floating around 5
https://prnt.sc/YFkDKnTaEQps
The Chinese housing crisis is imaginary and essentially doesn't exist, as new home prices in China are only down 0.1% this year, despite the massive amount of panic in equity markets. China sets it's own prices, and the CCP has set floors which forbid prices from actually dropping, making a crash not supported and desired by Xi IMPOSSIBLE within this market.
https://prnt.sc/lZPBIXSQNDkT
Almost all of the Chinese real estate companies that are inside the top holdings of the CHIR fund have remained consistently profitable and with strong balance sheets through this "crisis", with the single exception of Country Garden, which is likely to go bust for reasons that seem to pertain to poor management of the company, rather than the industry at large.
https://prnt.sc/pUfLFyceNtQW
The Ghost Cities that the media is obsessed with aren't as they appear to the western eyes. They are actually cities that largely WILL be populated, just in a much longer timeframe than most would "like". It can take a decade to fill these cities up, but they do not sit empty forever. Take for example the Zhengdong New Area which was deemed as a "ghost city" in a 2013 news report by 60 Minutes, which described the area as having, "new towers with no residents, desolate condos, and vacant subdivisions uninhabited for miles and miles and miles". Years later, Bloomberg in 2021, had described the area as "bustling with life", and noted that the district's economy has grown at an annual rate of 25% from 2013 to 2018, and the population has grown 27.5% from 2019 to 2020. "Ghost Cities" are a media sensation invented out of thin air, and they are not a new thing. The west has been deeply confused about China's real estate market for a long, long time.
That's the rundown. This is the single best opportunity I've seen in the past 2 years that I have been beating the markets, and I am 90% confident that I am right here in the long run of 1-2 years although I could totally see equity prices dropping a bit more over the next few months. The main risk is purely that China could invade Taiwan, and get obliterated by sanctions. The odds of that are currently only 5% during 2023-2024, per Metacalculus. This is something to track closely as it evolves.
https://prnt.sc/9be83MB_mJsT
The bottom line is that Xi is 70 years old without a lot of time left to live. He will kick the can down the road on the Chinese real estate bubble, and let someone else in the far future deal with the problem. If he does NOT kick the can down the road, he will be beheaded in a revolution of his people, of whom 90% own homes and have a strong vested interest in a continuation of the housing bubble. The solution to every economic problem is to print more money, and thats what he's doing.
I am making a huge investment into Chinese real estate equities with half my networth. My plan is to hold this for at very least a year, and realize a long term gain. I am expecting to make a 100% gain on this investment within 1-2 years. That's my base case, anyway. Things could go differently of course. Since it's an investment, I don't have plans to sell out if prices drop, unless there is something that changes more fundamentally with this market.
I am going to make a bullet point list here of my best arguments for being long Chinese real estate and some screen shots to back each part up.
Extreme stimulus from the PBOC is being pushed into markets, with Chinese money supply up 10% this year. Cuts on stamp duty taxes, explicit market-supportive statements from high officials, cuts in interest rates, and cuts in bank reserve rates all support the idea that China is easing hard and wants to push markets up.
https://prnt.sc/3nQymVM96zKU
Record panic not seen in over a decade was witnessed at the start of last September, with around 10% of ALL western finance articles being bearish on China, and every other instance of similar panic has led to great returns in the medium to long term
https://prnt.sc/7DpM9P_VJNUy
Chinese real estate equities are at the lowest valuations in history, with P/B ratios floating around 0.5 and P/E ratios floating around 5
https://prnt.sc/YFkDKnTaEQps
The Chinese housing crisis is imaginary and essentially doesn't exist, as new home prices in China are only down 0.1% this year, despite the massive amount of panic in equity markets. China sets it's own prices, and the CCP has set floors which forbid prices from actually dropping, making a crash not supported and desired by Xi IMPOSSIBLE within this market.
https://prnt.sc/lZPBIXSQNDkT
Almost all of the Chinese real estate companies that are inside the top holdings of the CHIR fund have remained consistently profitable and with strong balance sheets through this "crisis", with the single exception of Country Garden, which is likely to go bust for reasons that seem to pertain to poor management of the company, rather than the industry at large.
https://prnt.sc/pUfLFyceNtQW
The Ghost Cities that the media is obsessed with aren't as they appear to the western eyes. They are actually cities that largely WILL be populated, just in a much longer timeframe than most would "like". It can take a decade to fill these cities up, but they do not sit empty forever. Take for example the Zhengdong New Area which was deemed as a "ghost city" in a 2013 news report by 60 Minutes, which described the area as having, "new towers with no residents, desolate condos, and vacant subdivisions uninhabited for miles and miles and miles". Years later, Bloomberg in 2021, had described the area as "bustling with life", and noted that the district's economy has grown at an annual rate of 25% from 2013 to 2018, and the population has grown 27.5% from 2019 to 2020. "Ghost Cities" are a media sensation invented out of thin air, and they are not a new thing. The west has been deeply confused about China's real estate market for a long, long time.
That's the rundown. This is the single best opportunity I've seen in the past 2 years that I have been beating the markets, and I am 90% confident that I am right here in the long run of 1-2 years although I could totally see equity prices dropping a bit more over the next few months. The main risk is purely that China could invade Taiwan, and get obliterated by sanctions. The odds of that are currently only 5% during 2023-2024, per Metacalculus. This is something to track closely as it evolves.
https://prnt.sc/9be83MB_mJsT
The bottom line is that Xi is 70 years old without a lot of time left to live. He will kick the can down the road on the Chinese real estate bubble, and let someone else in the far future deal with the problem. If he does NOT kick the can down the road, he will be beheaded in a revolution of his people, of whom 90% own homes and have a strong vested interest in a continuation of the housing bubble. The solution to every economic problem is to print more money, and thats what he's doing.