China Real Estate Stocks Turn Bearish After Goldman Sachs Forecast

 China Real Estate Stocks Turn Bearish After Goldman Sachs Forecast

China Real Estate Stocks Turn Bearish After Goldman Sachs Forecast

Goldman Sachs forecast reveals that an L-shaped recovery in the Chinese real estate sector is expected. In other words, investors can expect some serious headwinds in the real estate sector as the economic recovery in China is running out of steam.

After the Goldman Sachs forecast, the shares of most real estate companies in China turned bearish as investors digested the changed dynamics.

Guangzhou R&F Properties Co Ltd, Poly Property Group Co Ltd, & Country Garden Holdings Company Ltd lost around 2%-5% of their stock value during the day. However, the biggest loss was seen in Sunac China Holdings Ltd, which witnessed a 12% downside. After such a bearish move, the Sunac China Holdings Ltd stock was last seen trading at 12-year lows.

KWG Property, which is a prominent real estate firm from Hong Kong, was also down by 7.6% for the day. On the other hand, Vanke Co Ltd, which is listed in China, lost 1.1% of its value.

L-Shaped Recovery Is Expected - Goldman Sachs

According to a note from Goldman Sachs, the property market in China is all set to go through an L-shaped recovery. In fact, the same recovery pattern is also expected for a broader rebound in the country's economy.

Some analysts believe that China will not use its real estate sector for any stimulus measure (short term). Instead, China will likely decrease the economy's over-reliance on the real estate sector for growth.

Since 2021, the real estate sector is accounting for around 33% of China's GDP on average. So it appears that more trouble is likely ahead for this sector as China looks at other venues.

In addition, a fall in demographic demand is also expected to slow down the Chinese economy. This means China will have to shift its focus towards other sectors.

During the last 3 years, the property sector of China has weakened due to the COVID-19 restrictions and tight regulations. This caused a lot of defaults in the real-estate sector which further dimmed the chances of a strong comeback.

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