EFTA01385477

3 January 2018 HY Corporate Credit HY Multi Sectoriirledia. Cable & Satellite Property market cycle is cooling off, will policy loosen in Q2? The downward cycle in the property market will likely last into HI 2018. This most recent cycle lasted longer than many had expected. The yoy growth of property sales just turned negative in Oct after staying positive for 30 months. Previous property cycles typically lasted for 12-20 months, measured by months for which 3mma property sales growth stayed positive (Figure 18). The uniqueness of the current cycle is that prices are unsynchronized across city groups. In previous cycles, property price growth peaks at around the same time for all cities. In the current cycle, price growth peaked in tier 1 cities in mid-2016, followed by top tier 2 cities in late-2016, and finally in tier 3 cities in mid-2017 (Figure 48). The lagged property market boom in tier 3 cities provided strong support to the economy in 2017. Figure 47. Property sales value 1900 64bon Yuen oiefonny odes vat implied monthly 3inen• 140 94v% 1800 gefrAlt. 120 1400 103 1200 131) 1020 60 000 40 600 20 400 -20 200 .40 2003 2009 20, 0 2011 2012 2013 2014 2015 2016 2017 Z9499. Ph.D. Chief Economist +862-2203 8308 Yi Xiong, Ph.D. Economist +862-2203 6139 Figure 48: Property price index. yoy% 35 196 —Too 1e, 2 •••••Elattom was 2 30 1 —.Snake 84.3 Nor'-co:4Mo tier 3 25 1 20 I 15 f3RRRERM 11.1- 1R8RERg RR. f-- 5"rrilt ern Sane Oeuttatank. WINO Sane Denote's*, MVO Property policy tightening in tier 3 cities is still underway. 41 tier 3 cities have tightened policies so far this year. Tightening comes in two rounds: a first round of tightening occurred during March-May, while a second round started in September (Figure 49). We adopt a "difference in difference" (DID) approach to evaluate the impact of policies on property markets. Our results show that policy tightening are effective with a time lag. Property prices tend to increase further in the first 3 months, then stagnates in the next 5-6 months. In this regard, the impact of a second round of tightening should be reflected in property prices in H1 2018. I Figure 49: Number of tier 3 cities rolling out lightening policies a a a I? 7 I 8 5 4 3 2 2 I O S s 2 1 g R RR Fil 2 I i- 2 se AR k AA 5 4 Figure 50: Effect of property tightening policies, a DID approach 130 notrnia U tin erketpning row +Contra' group 'X 125 'eX0 115 110 105 100 &amp 044-494 &rd. CREW San. Gnats Sr* CREC weer. co saved*, Inflate P**1 Page 204 to 15 12 9 3 0 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0086763 CONFIDENTIAL SDNY_GM_00232947 EFTA01385477