HK Stock Market Move | Inner room stocks fall again in March, real estate industry continues marginal improvement. Morgan Stanley expects industry to still be under pressure in the second quarter.

Nafang stocks fell again, as of the time of release, ZHONGLIANG HLDG (02772) dropped by 5.56% to 0.034 Hong Kong dollars; R&F PROPERTIES (02777) fell by 2.67% to 0.365 Hong Kong dollars; SUNAC (01918) fell by 1.89% to 1.04 Hong Kong dollars. On the news front, the China Index Research Institute stated that, from the market performance perspective, the real estate industry in March continued to show marginal improvement, with Beijing and Shanghai welcoming a "small spring" market. In the new housing market, with the release of demand after the Chinese New Year, the concentration of high-quality projects in core cities entering the market, and increased marketing efforts, the year-on-year decline in new house transactions in March narrowed to 13%; the month-on-month decline in second-hand house prices in the top 100 cities continued to narrow, with increases in Shanghai and Hefei; in the land market, the transaction area and transfer payments for residential land in 300 cities in March decreased by 15% and 35% year-on-year, respectively, with the decline narrowing. Morgan Stanley released a research report stating that the performance of real estate developers in 2025 was weak, in line with market expectations. Core profits decreased by an average of 29% annually, mainly due to a decrease in revenue by 11% annually, as well as a 1.1 percentage point contraction in development gross profit margin, leading to an industry ROE of only 0.6%. Liquidity risk in the industry has now been largely alleviated, with developers generally reducing debt and maintaining stable cash coverage ratios, but there is still significant differentiation between individual companies. The bank pointed out that by the end of January, it had already predicted a downturn in the industry following the emotional rebound. In the second quarter of 2026, the industry's performance may still lag behind the broader market, as a further weakening of property prices will further impact market sentiment.