China's property curbs hit small developers' shares, industry consolidation expected to accelerate

Regulation
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Shares of small property developers fell sharply after Chinese authorities announced a comprehensive regulatory overhaul for the crisis-hit real estate sector last week, with expectations growing that industry consolidation will accelerate. On the 28th, China announced measures to reduce developers' reliance on funds received from buyers before homes are completed. The CSI 300 Real Estate Index fell 2% in morning trading, while an index of Chinese developers listed in Hong Kong dropped about 4%. Everbright Securities, in a client report, said the new measures "raise the bar for property developers in terms of both financing and operational capabilities," and predicted that "most small and medium-sized developers will be unable to secure profits and will be forced to exit the market," accelerating industry consolidation. Among individual stocks, Shenzhen Special Economic Zone Real Estate and Shenzhen Xiangjiang Holding both fell about 5%, while Shenzhen Tellus dropped nearly 8%.

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