CITIC Securities: Real estate financing coordination mechanism steadily advancing, helping stabilize real estate enterprises and improve bank credit.

CITIC SEC released a research report, stating that on February 29, the Ministry of Housing and Urban-Rural Development and the Financial Supervision Administration jointly held a video conference on the coordination mechanism of urban real estate financing. The meeting affirmed the good start of the coordination mechanism since January and set the tone for the next phase to "expand the effectiveness" and promote the implementation speed and quality improvement of the mechanism. The bank believes that the advancement and implementation of the real estate financing coordination mechanism are expected to alleviate the liquidity pressure of some real estate companies, improve the expectations of fulfilling buildings, and help stabilize the real estate industry and improve bank credit. On a stock-specific level, the bank's three gradual mainlines recommended as of 2024 are entering the initial realization stage, and the current suggestion is to maintain the allocation strategy: 1) Defensive targets, mainly large banks, focusing on the high certainty return brought by dividend yield and valuation recovery under the logic of low-risk assets; 2) Elastic targets, focusing on the significant valuation recovery space brought by economic recovery elasticity; 3) Long-term targets, focusing on sustainable endogeneity, 2024 is expected to be a transitional year. CITIC SEC's views are as follows: Events: On February 29, the Ministry of Housing and Urban-Rural Development and the Financial Supervision Administration jointly held a video conference on advancing urban real estate financial policies. On February 29, the Ministry of Housing and Urban-Rural Development and the Financial Supervision Administration jointly held a video conference on advancing urban real estate financial policies. The two departments jointly set the goal of "expanding the effectiveness of the urban real estate financing coordination mechanism," as follows: 1) With the joint efforts of government, banks, and enterprises, the coordination mechanism is rapidly being implemented. The meeting pointed out that since the deployment of the urban real estate financing coordination mechanism in January, many places have taken rapid action to establish mechanisms, nominate lists, and implement the work, achieving a good start. As of February 28, 276 cities in 31 provinces nationwide have established urban financing coordination mechanisms, proposing about 6,000 real estate projects. Commercial banks have quickly screened projects, with approvals exceeding 200 billion yuan in loans. Real estate companies such as COUNTRY GARDEN, Longfor, Jinke, and Vanke have projects selected, reflecting the principles of fairness and justice in the coordination mechanism. 2) Setting a deadline to continue to improve the speed and quality of mechanism implementation. The meeting pointed out that according to the principle of "building as much as possible," by March 15, cities at the prefecture level and above should establish financing coordination mechanisms. They should both efficiently complete the promotion of the "white list" and effectively solve the difficulties in project coordination. It is necessary to rigorously select projects according to standards, and after confirmation by financial institutions, form a list of qualified projects. In addition, the meeting further clarified and refined the responsibilities of local governments, financial institutions, provincial financing coordination mechanisms, the Ministry of Housing and Urban-Rural Development, and the Financial Supervision Administration, urging to accelerate and strengthen quality while implementing the closed loop of "promotion-feedback" of projects and the closed loop of "disbursement-use-repayment" of loan funds. Overall, we believe that the advancement and implementation of the real estate financing coordination mechanism are expected to alleviate the liquidity pressure of some real estate companies, improve the expectations of fulfilling buildings, and help stabilize the real estate industry and improve bank credit. Last week, funds flowed out of the banking sector, focusing on important statements during the two sessions. Last week, the CITIC BANK stock index fell by 2.33%, underperforming the Shanghai and Shenzhen 300 index (+1.38%) during the same period last week. We believe that the short-term adjustment of the banking sector last week was mainly due to the post-holiday overall market performance continuing the warming trend, short-term market sentiment boosting, and style switching causing some funds to shift from excess returns sectors. In the short term, there are still emotions related to the two sessions in the current market, and under the low-interest-rate environment, undervalued high dividend-yielding assets still have some allocation value. The absolute return of the banking sector is expected to have some room. Risk factors: Sharp decline in macroeconomic growth; Deterioration of bank asset quality beyond expectations; Regulatory and industry policy changes beyond expectations; Downward trend in regional economic prosperity; Companies' development strategy execution falling short of expectations. Investment view: Real estate financing coordination mechanism steadily advancing. On February 29, the Ministry of Housing and Urban-Rural Development and the Financial Supervision Administration jointly held a video conference on advancing the urban real estate financing coordination mechanism. The meeting affirmed the good start of the coordination mechanism since January and set the tone for the next phase to "expand the effectiveness," promote the implementation speed and quality improvement of the mechanism. We believe that the advancement and implementation of the real estate financing coordination mechanism are expected to alleviate the liquidity problems of some real estate companies, improve the expectations of fulfilling buildings, and help stabilize the real estate industry and improve bank credit. In the short term, there are still emotions related to the two sessions in the current market, and under the low-interest-rate environment, undervalued high dividend-yielding assets still have some allocation value, and the banking sector still has some absolute return space. Looking ahead for the entire year, the following catalytic factors focus on the absolute return opportunities of the banking sector brought by macroeconomic stabilization and credit risk improvement. On a stock-specific level, our three gradual mainlines recommended for 2024 have entered the initial realization stage, and the current suggestion is to maintain the allocation strategy: 1) Defensive targets, mainly large banks, focusing on the high certainty return brought by dividend yield and valuation recovery under the logic of low-risk assets; 2) Elastic assets, focusing on the significant valuation recovery space brought by economic recovery elasticity; 3) Long-term targets, focusing on sustainable endogeneity, with 2024 expected to be a transitional year.