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By Summer Zhen and Jiaxing Li
HONG KONG (Reuters) - Some large hedge funds and investors are accumulating long-shunned China property stocks at low prices, anticipating lucrative returns when the sector recovers from its prolonged crisis.
Investors said recent positive signs, from improving home prices in top cities to industry leader China Vanke's recapitalization plan, suggest this year will be the turning point for the real estate market.
To be sure, they are selective and have set their sights on leading state-backed homebuilders and China's largest online property brokerage.
"We have added some large state-owned developers recently, based on the logic of sector turnaround and winners take all," said Wang Qing, chairman at Shanghai Chongyang Investment Management, which runs $5 billion.
"Land sales are recovering in first-tier cities, and we noticed that only these few real estate developers are still actively buying land," he said, adding that meant these builders were taking a larger market share.
Chinese property has been a top short-selling target through the debt-ridden sector's downturn for more than three years and as a raft of privately-owned property giants, including Evergrande and Sunac China, went bankrupt.
The shift in sentiment indicates investors are rebuilding confidence in the sector after the industry consolidation and massive measures introduced by China since September to stabilize the slumping housing market.
Hong Kong-based Golden Nest Capital is also dipping into shares of some state-owned developers.
"You could say that the sales volume of new homes has declined by half, but the number of developers has decreased even more," said Stanley Tao, CIO at Golden Nest Capital Management.
As the sector stabilizes, the rebound in these overlooked stocks will be significant, Tao said.
Hong Kong-listed mainland property stocks surged more than 15% this month, making it one of the top performing sectors just behind tech stocks.
FUNDS BUY KE HOLDINGS
KE Holdings, China's Zillow-like real estate platform, has become a darling among Asia's top hedge funds.
Hong Kong's $9 billion Aspex Management built new positions in U.S.-listed KE Holdings by adding 6.51 million shares in the fourth quarter of 2024 with a market value of about $120 million as of the end of 2024, according to its filing with the U.S. Securities and Exchange Commission.
WT Asset Management, which manages $4 billion, boosted its stake in KE Holdings by 2.2 million shares worth more than $40 million in the fourth quarter as well.