According to a report published by J.P. Morgan Chase, there are still policy risks in the mainland property market, but once the increase in property prices exceeds the economic growth rate, that is, by more than 10%, the policy risk will rise. Listed housing companies have sufficient saleable resources to support contract sales growth in the first half of the year. At that time, market supply and demand will be balanced; Motong expects new construction volume to resume growth in the first half of the year and increase supply in the second half of the year, thus helping to limit the increase in property prices. According to the report, domestic housing stocks rose 67% last year and 7% from this month to date, reflecting the favorable climate in the mainland property market and reduced cash flow risk. It is expected that the reduction in financing costs for small and medium-sized developers will bring further impetus for reevaluation. The bank is optimistic about enterprises with third-tier city business, as trading in such cities will eventually recover. Motong raised the earnings per share for domestic housing stocks by 2% and 5% and the net asset value forecast by 3% for the 2013/14 period. The target price is based on the forecast price-earnings ratio of 10.5 times in 2013, due to lower financing costs and reduced risk of equity financing. The bank preferred Agile (03383-HK), Country Garden (02007-HK), and Evergrande (03333-HK) because they will benefit from the recovery of the property market in lower-end cities and have relatively cheap valuations; among small-cap stocks, they are optimistic about Hejing Taifu (01813-HK) due to increased long-term capital or restarting land purchases and restructuring product portfolios. Due to valuation considerations, it is recommended to avoid Poly (00119-HK), Ocean Real Estate (03377-HK), and Longhu (00960-HK). The ratings of Vanke (200002-CN), China Resources Land (01109-HK), and Shimao (00813-HK) were upgraded from “neutral” to “increased holdings”; the ratings of R&F (02777-HK), Fang Xing (00817-HK), and China Overseas (00688-HK) were downgraded from “increased holdings” to “neutral.” Motong gave the new and old ratings and target prices to each stock as follows: Shares/original rating/new rating/original target price/new target price (yuan) Agile (03383-HK) /increase/increase/increase/12.4/14 Country Garden (02007-HK) /increase/increase/4.6/4.8 Evergrande Real Estate (03333-HK) /increase/increase/4.25/5.3 Poly Real Estate (00119-HK) /Neutral/Neutral/5/6.5 Longhu Real Estate (00119-HK) /Neutral/Neutral/5/6.5 Longhu Real Estate (0060-H9K) /Neutral/Neutral/12.1/14.4 Ocean Real Estate (03377-HK) /holdings reduction/3.4/5.25 China Overseas (00688-HK) /holdings/neutral/23.5/26 Fangxing Real Estate (00817-HK) /increase/neutral/3.1/3.1 R&F Real Estate (02777-HK) /increase/neutral/13.7/15.3 Huarun Land (01109-HK) /neutral/holdings/20/270Wanke (200002-CN) /neutral/increase/11.2/15.5 Hejing Taifu (02713-HK)) /increase/increase holdings Holdings/6.2/7.2 Shimao Real Estate (00813-HK) /Neutral/Increased Holdings/15.4/19 Ruian Real Estate (00272-HK) /Increased Holdings/4.2/4.2