Sales continue to slow down: Average daily sales volumes for the past week inthe major seven cities we track were down 2% W/W and still 16% higher thanthe average in 2014. The decline was mainly driven by the decrease in sales inBeijing and Chengdu, down 20% and 17%, respectively. After the previousstrong rebound in December, average sales in January have slowed downsequentially by –25% M/M.

Sunac acquired Kaisa’s four projects in Shanghai at Rmb2.4 bn: Sunac andKaisa announced on Feb 1, 2015, that Sunac agreed to acquire Kaisa's projectsin Fengxian (100%), Jiading (51%), Qingpu (100%) and Pudong (51%) inShanghai at a total consideration of Rmb2.37 bn. According to theannouncement, the disposal will record a loss of Rmb43.9 mn at Kaisa, and thisshould imply Sunac is buying at about 15% discount to the prevailing marketprice. We think more disposal of this kind should continue, mainly on its assetsin Shenzhen and Guangzhou. Sunac has remained suspended and according toCaixin, Sunac is in negotiations to purchase a 49% stake in Kaisa withgovernment back-up. We continue to think that developers with ample cash onhand and with current exposure in Kaisa's portfolio, such as CR Land, Vankeand COLI, will benefit from Kaisa’s asset disposal.

Residential housing prices in 100 cities recorded M/M climb in January:According to China Index Academy, the ASP of residential housing in 100 citiesin January was Rmb10,564 psm, up 0.21% M/M after declining 8 months.

Meanwhile, the ASP of residential housing in top 10 cities, including Beijingand Shanghai, was Rmb18,990 psm, up 0.59% M/M. However, the strong salesmomentum last December was unable to extend to last month. According toCRIC, the transaction volume in 54 cities in January was down 1% M/M anddown 31% Y/Y.

Shanghai will not remove HPR measures either: According to NBD and Sina,Mr. Liu Hai Sheng, Director of Shanghai Municipal Bureau of Housing Securityand Management, said there will be no change in its current HPR policy andnon-local residents will continue to be not allowed to purchase housing exceptfor family purposes. After Beijing’s confirmation of not removing HPRcurrently, Shanghai reiterated that there is no plan to ease HPR either. Webelieve other tier-1 cities may follow Beijing and Shanghai for not removingHPR measures as we continue to see hot land sales in tier-1 cities and improvinginventory level.

Remain cautious until physical market rebounds: We have been cautious onthe sector since mid-January, mainly due to the slow sales in the physicalmarket. The sector was down 1% since Jan 19, versus HSI +3%. We continue toremain cautious on the back of weak physical market and macro concern. Weprefer CR Land to COLI, and prefer Country Garden to Shimao.