Dim Sum Express

Auto: Sector to transition from restocking to destocking in 2Q17

    The auto sector policy tone is optimistic in 2017, and we remain upbeat about the positive effect of tax discounts for passenger vehicles with small engines. After sector inventory returns to a normal level, expected preferential policy expiry is likely to spur a significant rebound in business conditions in 3-4Q17. We continue to expect full-year passenger vehicle wholesale (auto maker to dealer) volume growth of 5-10%, with wholesale growth to slow and retail sales growth to strengthen in 2Q17, and both wholesale and retail sales growth to accelerate in 3-4Q17.

    Property: Higher home buying barriers and costs to hurt transactions

    We believe upcoming tightening measures will also include those to increase the cost of borrowing mortgages, which should be achieved through a decrease in the mortgage rate discount vs the benchmark lending rate, as an interest rate hike is unlikely to be seen in the near term. Property transactions in key cities are likely to come down as a result of higher home buying barriers coupled with more expensive mortgage rates. Meanwhile, third/fourth-tier cities should continue to outperform as their policy environment is likely to remain favorable in the near term.