Yamato: In the Tokyo market, not all sectors have fully recovered. The preferred choices are CHINA RES LAND (01109) and CHINA OVERSEAS (00688).

Daiwa released a research report stating that since April, the stocks of the domestic real estate sector have rebounded by more than 20% from their lows, mainly driven by the belief that first-tier cities (especially Shanghai) have bottomed out. However, the bank is not confident that this recovery is a structural transformation, as both developers and buyers currently lack confidence. The bank's top picks are CHINA RES LAND (01109) and CHINA OVERSEAS (00688), both rated as "buy". The bank explained that real estate sales in April exceeded expectations, especially during the traditional off-season. Sales of new and existing residential properties increased by 2.4% and 5.0% respectively year-on-year, with the recovery particularly evident in first-tier cities, where sales of new and existing properties increased by 20% and 14% respectively year-on-year, and the strong momentum continued into the Labor Day holiday. At the same time, signs of stabilization in the prices of existing homes have also appeared. However, the bank pointed out that the improvement in the second-hand market is mainly driven by old small and rundown apartments with low prices and high rental returns, while sales of residential properties priced above RMB 5 million have not yet seen any recovery, with a year-on-year decline of 25%. In addition, developers have quickly seized the opportunity of market sentiment improvement, with a 70.8% year-on-year increase in pre-sale permits for new homes in Shanghai in April, but there are few projects offering discounts, indicating a lack of confidence among developers and buyers, which is a prerequisite for structural and sustained recovery. Daiwa believes that if the momentum of sales in first-tier cities continues, the sector's stock prices may further rise in the short to medium term, but there is also a real risk of a pullback. The bank prefers state-owned developers with a truly first-tier city business exposure, rather than private enterprises, as private enterprises will face downgrading risks once the momentum weakens.