China’s largest real estate broker and why you should short its shares

Evergrande isn’t the only Chinese real estate group facing an uncertain future. KE Holdings is too. Matthew Partridge explains how to short it.

Building site in China
A messy end for China’s property boom?
(Image credit: © Andrea Verdelli/Bloomberg via Getty Images)

One key structural feature of the Chinese economy over the past 15 years has been the booming property market. Thanks to a combination of rapid economic growth, loose monetary policy and Beijing’s decision to put housebuilding and construction at the forefront of a series of fiscal stimulus packages, the Chinese real estate sector is the largest in the world. Indeed, China’s property market is now worth twice as much as the US property market, even though the US economy is still 50% larger in dollar terms (and only slightly smaller when differences in purchasing power are accounted for). However, this boom seems about to come to a messy end.

Beijing has slammed on the brakes, restricting access to credit and tightening regulations, in a (belated) attempt to deflate the bubble. In the past, attempts to rein in the sector have ended without much impact, partly because the Chinese government feared that a slowdown in the sector would have too much of an impact on growth. However, the current crackdown seems more serious. Not only has the number of new building projects collapsed, but many Chinese property groups are now in trouble, most notably Evergrande, which technically defaulted last month, and is undergoing an official “restructuring”.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri