China International Capital Corporation (CICC): In the second half of the year, observe whether the performance of core cities can improve steadily. It is recommended to actively invest in the real estate sector.

CICC released a research report stating that on July 30, the Politburo of the Communist Party of China analyzed the current economic situation and economic work, proposing to "stabilize the real estate market" regarding real estate. The probability of significant changes in the real estate policy environment in the short term is limited, and it is suggested to pay attention to the natural evolution of the industry fundamentals and the progress of macro-level policies related to expanding domestic demand. The market is currently in a wait-and-see mode regarding the real estate sector, awaiting catalysts. The firm prioritizes recommending quality leading companies with strong asset quality, positive sales expectations, and stable performance, while also highlighting recent opportunities for rebound in underperforming stocks due to performance and operational conditions when beta starts to kick in. CICC's main points are as follows: The real estate market has generally maintained steady growth this year, with policies continuing their previous stance. In terms of transaction volume, in July, the sales volume of new and second-hand homes increased by about 10% year-on-year, with second-hand homes achieving four consecutive months of year-on-year sales growth since the second quarter; regarding housing prices, the month-on-month decline in house prices has remained stable at around -0.7% since the beginning of this year, nearly halving the decline compared to the second half of 2025, mainly driven by the continuous optimization of the supply-demand structure in some super high/high-level cities. This Politburo meeting continues the expression of "stabilizing the real estate market", which is more concise than the previous "efforts to stabilize the real estate market", and combining this with the fairly sufficient context of real estate policies, the firm believes that the probability of significant changes to the real estate policy environment in the short term is limited. It is suggested to focus on the natural evolution of the industry fundamentals and the progress of macro-level policies related to expanding domestic demand. In the second half of the year, it is crucial to observe whether the performance of the housing market in core cities can progress steadily. The firm believes that the endogenous recovery in the real estate market fundamentally stems from the supply-side clearance of leading cities, rather than traditional external demand improvement, which may result in a slower recovery pace compared to previous cycles. However, the resulting solid fundamentals will be more beneficial for the long-term healthy development of the real estate market. Looking ahead, the firm believes that with a relatively stable expectation environment and a lower base, the year-on-year transaction volume in the second half of the year may not perform weakly, but the catalysts expected by the market may need to be more evident. For example, core city housing prices starting to rise; it is worth noting that in the past month, the listing volume in Shenzhen has also entered a downward phase like that of Shanghai and Beijing previously, and its trend continuity and price responses should be observed. It is recommended to actively position in the real estate sector. Since June, the valuations of core targets have fully adjusted, and short-term bearish factors related to interim performance have been partially released, while liquidity in traditional industries has also improved. The market is currently in a wait-and-see mode regarding the real estate sector, awaiting catalysts. Risks: Deterioration of supply-demand structure in core cities; significant fluctuations in the policy environment; worsening liquidity conditions.