Billionaire Wu Yajun, former chair of Longfor Properties.
Jerome Favre/Bloomberg
Wu Yajun, the billionaire cofounder of real estate developer Longfor Properties, added $1.1 billion to her net worth on Tuesday, a day after Beijing pledged more support for China’s troubled property sector. But some analysts are already warning optimism about this support might be overdone.
The 59-year-old female tycoon has a net worth of $8.8 billion on the Real-Time Billionaires List, derived mostly from her more than 40% stake in the Hong Kong-listed developer, though she stepped down as chair of the company last October. Longfor’s shares soared as much as 28% during the morning trading session on Tuesday, making it one of the best-performing real estate stocks after a policy readout on Monday, in which Chinese authorities announced the further relaxation of curbs on the country’s beleaguered property sector.
Although the top Politburo meeting didn’t announce large-scale stimulus measures that some investors had long hoped for, it concluded with general pledges to boost domestic consumption and adjust real estate-related policies to ensure “stable and healthy” market development. Investors appear to be excited by the removal of China’s President Xi Jinping’s key slogan, ‘houses are for living in, not for speculation,’ from the policy readout. First introduced in 2016, this principle kickstarted a multiyear crackdown on what was viewed as excessive leverage in the entire real estate sector.
“For the first time since 2018, Beijing did not mention the general principle of ‘houses are for living in, not for speculation’ at its top-level economic policy meetings,” Nomura economists led by Lu Ting wrote in a research note on Tuesday. The phrase was removed because “overheating risk has subsided,” and its omission sent “a signal of further easing property restrictions,” the economists added.
Longfor could stand to benefit from its relatively prudent financial approach. The company didn’t borrow across the board like billionaire Hui Ka Yan’s China Evergrande Group, which revealed last week that its total liabilities have further increased to $335 billion and it is now going through a lengthy restructuring process offshore. Wu, in the meantime, has repeatedly stressed the importance of financial discipline during her time at the helm of Longfor, which analysts said helped the company better navigate China’s property crackdown.
But investors might be getting ahead of themselves in expecting concrete support, says Shen Meng, managing director of Beijing-based boutique investment bank Chanson & Co. In addition to Longfor, shares of billionaire Yang Huiyan’s real estate developer Country Garden surged on the back of the Politburo meeting. The fellow Hong Kong-listed developer was up 14.3% Tuesday morning, reversing losses from yesterday when it tumbled on renewed debt fears–especially after JP Morgan downgraded the firm on liquidity concerns.
“The market has harbored great hopes for the policy meeting,” says Shen. “But other than dropping the slogan, there is no concrete guidance, especially mentioning adjustments for improving lackluster property sales and solving the broader problem of lack of demand in a weak economy.”
His view is echoed in part by the Nomura analysts. The economists wrote in the aforementioned note there might be some marginal easing of purchase restrictions in large cities, but they don’t expect previous stimulus measures such as shantytown renovation programs.
“Beijing appears to have a more bearish assessment of China’s economic situation,” they wrote, adding that “there is no quick fix for the property sector.”