Negative Contagion From China Developers’ Stress Continues To Shroud PMCs, Stay Defensive With SOEs

China real estate activity continues to be weak into the second half, hampered by the start-stop zero-COVID-19 policy that likely limits the positive impact of policy easing. We think developers' broad-based recovery from liquidity stress is key to a durable recovery as it addresses the core issue of homebuyer confidence. However, the current credit environment remains challenging for developers. Presales activities remain at a slower pace, implying growth concerns for the property management companies, or PMCs, in terms of the prospects for future gross floor area under management.