Asia Pacific Credit Research
12 June 2026
J P M O R G A N
Asia Pacific Credit Research
Alvin Au AC
(852) 2800-8533
@
Soo Chong Lim
(852) 2800-7387
@
. Morgan Securities (Asia Pacific) Limited
Our property trip to Shenzhen and Shanghai last week revealed that the local
housing markets are stabilizing in a K-shape. Luxury property sales are robust on
the back of strong demand. Transaction volume for entry-level units has recovered,
but the midrange segment remains soft. While China Property’s recovery remains
city-/segment-specific, we selectively prefer developers with IP transformation
stories and credits with decent valuations. We stay OW on: (1) the Longfor curve
(9-10%) due to its solid debt servicing ability; and (2) SHUION ‘29s (9%), as they
are a proxy for Shanghai’s luxury market recovery with declining maturities.
Seazen has managed to handle refinancing so far, but we stay Neutral on the ‘28s,
as we find valuation fair after the compression from a 19% yield to 13% YTD.
• Shenzhen housing market stabilizing in a K-shape: A Shenzhen property
expert we met noted that the city’s secondary housing market has stabilized in
pricing/volume on the back of policy easing in 1H26. Nevertheless, there is a
clear differentiation across pricing tiers and districts. Luxury home sales are
robust, and entry-level transactions have recovered, but the midrange segment
remains weak. Nanshan and Futian have outperformed, but other districts are
softer. Primary sales are driven by premium projects, and affordable/entry-
level unit transactions are shifting to the secondary market. The expert believes
Shenzhen’s large-scale rollout of affordable housing may weigh on the mass
market’s recovery in the next few years.
• Polarization seen on the ground: Our channel checks in Shenzhen/Shanghai
largely confirmed the expert’s views. Luxury homes (>Rmb20mn) see robust
sales on the back of limited supply and strong demand from young tech elites
(a positive wealth effect from the AI/robotics boom). However, mass-market
buyers remain price-sensitive due to concerns about job security, the wage
outlook, etc. The IP projects we visited showed divergent performance, as well.
While premium malls are solid on the back of property market stabilization/
strong equity markets, mass-market malls diverge subject to their location,
tenant mix, operating strategies, etc.
• Seazen: IP transformation and REIT as new funding channel: Seazen aims
to clear a majority of its DP inventories in three years, with no land acquisition
plans in the near term. Management believes the retail market in tier-3/4 cities
is more stable and less competitive, and it targets steady IP earnings growth
with a focus on long-term competitiveness. Seazen sees Wanda as the key
competitor in low-tier cities and noted limited competition from CR Mixc for
now. It has managed to refinance maturities so far, thanks partly to a higher LTV
for IP-backed loans, and it is exploring REIT as a new funding channel.
• Stay selective, prefer Longfor curve and SHUION ‘29s: We are OW on the
LNGFOR curve and SHUION ‘29s at a >9% yield. We appreciate: (1)
Longfor’s solid debt servicing ability (Rmb17bn accessible cash + Rmb5bn-
10bn annual FCF vs. Rmb6bn-7bn annual maturities); and (2) Shui On as a
proxy for Shanghai’s luxury market recovery with declining maturities. Seazen
has managed to refinance maturities, but we find the ‘28s fair at a 13% yield.
See page 10 for analyst certification and important disclosures.
China Property
Site visit note: A K-shaped recovery
2
Alvin Au AC
(852) 2800-8533
@
Asia Pacific Credit Research
12 June 2026 J P M O R G A N
Highlights from experts and companies
Expert meeting with Director of Centaline Property Agency
(Shenzhen)
• Stabilizing secondary pricing and volume: The average price for secondary
homes in Shenzhen has dropped 43% from the 2020 peak, to Rmb46,103/sqm.
However, it has recovered by >2% since Jan-26, indicating a price bottom.
Transaction volume in the secondary market bottomed last year. It reached 56K
units in 2025 (+% yoy) and 31K in 5M26 (+% yoy). Secondary transactions
have outpaced primary home sales (38K/15K units in 2025/5M26, -21%/-21% yoy).
• Driven by policy relaxation: There were three rounds of policy relaxation in 1H26:
(1) VAT reduction on secondary home sales (lowered from 5% to 3% for units held
for <2 years; full exemption after 2 years); (2) the downpayment for commercial
properties lowered to 30%; and (3) the relaxation of home purchase restrictions
(HPR) in core districts (SZ/non-SZ residents allowed to buy one extra unit) with a
higher home provident fund loan limit. These policies have triggered a surge in total
property transactions to >10K units in May (a 14-month high).
• K-shaped recovery: Luxury homes (>Rmb20mn) see strong demand and robust
sales on the back of tech elites and a positive wealth effect from the AI/robotics
boom. Transactions for entry-level homes (~Rmb3mn) have recovered after a
sharp price drop over the past five years. The midrange segment (Rmb5bn-10mn)
is under pressure, with the weakest performance. By district, Nanshan and Futian
are the best performers in Shenzhen.
• Shrinking primary market and land supply: Primary launches have declined for
three consecutive years, with only 9,600 units launched in Shenzhen in 5M26 (-23%
yoy). Land auctions have also slowed dramatically, with only three plots sold in
2026 YTD, leading to a product skew toward high-margin high-end products.
National policies prohibit local governments from supplying new land if primary
inventory months are above 10 (Shenzhen: ). Land supply cannot improve
materially if inventory months do not come down.
• Primary vs. secondary market: Transactions are shifting toward the secondary
market due to declining primary launches and new land supply. For the primary
market, luxury/premium projects are driving sales. For the secondary market,
affordable and entry-level homes dominate transactions.
• Mass-market recovery weighed on by large-scale rollout of affordable housing:
Shenzhen will roll out 200K-300K units of affordable housing over 2026E-30E.
Affordable housing is priced at 50-70% of comparable commodity housing, and the
large supply will weigh on pricing in the low-/mid-tier segment. Shenzhen rolled out
43K units of affordable housing in 2025, which is new commodity housing
supply (35K).
• Stringent risk management: Shenzhen has no unfinished buildings since 2022, and
42% of property transactions are on completed projects. Stricter escrow rules have
also reduced unfinished building risk. Vanke’s Shenzhen projects are now co-
managed by SOEs (., Shenzhen Metro). It has therefore maintained a decent sell-
through rate and price stability for its projects.
bUrUmXxUoYtMqPsN9PcMbRoMmMsQpRjMmMrPjMmNoN9PqQsQNZtOwONZoOzR
3
Alvin Au AC
(852) 2800-8533
@
Asia Pacific Credit Research
12 June 2026 J P M O R G A N
Company meeting with Seazen Holdings
• Targets clearing most DP inventories in three years: Seazen is actively
contracting the DP business with a focus on reducing inventories and debts. Current
DP inventory stands at Rmb71bn. This includes: (1) of undeveloped land
(拟开发土地); (2) of projects under construction (在建项目); and (3)
of completed, but unsettled/transferred projects (竣工未结转). There
are also Rmb30bn of construction payables and Rmb10bn of tax payables. Sales are
stable at Rmb1bn/month, mainly from existing projects with minimal new launches,
and the developer targets clearing most DP inventories in three years, partly by
repaying debt/payables with existing inventories. It has maintained a DP team, but
has shifted its focus toward third-party construction service. Seazen has no land
acquisition plan in 2026, but may participate in select opportunities in the future.
• Investment Property a solid cash cow: Seazen’s IP business is solid, with
commercial operation revenue (rental income + property management fee) growing
3% yoy, to in 4M26, on the back of a 7%/10% increase in tenant sales/
foot traffic over the period. Compared to tier-1/2 cities, Seazen believes the
consumption market in low-tier cities is: (1) more stable (family-centric, less policy-
sensitive); and (2) less competitive (Wanda as the major competitor). Seazen is
ramping up investments to improve mall quality and tenant mix, and is increasing
the adoption of the fixed + turnover rent model to improve rental income (mostly
fixed rent contracts now). It targets in commercial operation revenue in
2026 (+4% yoy, 70%/50% gross/net margin), which more than covers its SG&A
expenses (Rmb4bn), interest payments (Rmb3bn) and taxes (Rmb3bn).
• Clear positioning to defend against competition from Wanda and CR Mixc:
Seazen sees Wanda as the major IP competitor in tier-3/4 cities. Compared to
Wanda, Seazen believes it has a better long-term strategy to cultivate mall
competitiveness and shopping experience, instead of being focused on near-term
profits for liquidity. Seazen sees a clear difference in positioning among IP players,
which include CR Mixc (premium), Longfor (midrange focus in tier-1/2 cities) and
Seazen (mass-focused on tier-3/4 cities). CR Mixc’s expansion to lower-tier cities
could be a potential challenge to Seazen, but management believes the former’s
near-term expansion would be constrained by heavy funding needs for mall buildup.
Seazen can reposition its malls toward the mass market even in the face of CR
Mixc’s competition in certain cities, as well.
• Higher LTV for IP-backed loans: Offshore debts are mainly in USD bonds
(Rmb5bn-equivalent outstanding), and onshore debts are mainly in Wuyue Plaza-
backed operating loans. Seazen has raised LTV for the IP-backed loans from 38%
(2024) to 43% (2025), and recent new borrowings are made at 50% LTV. There are
only Rmb2bn of remaining development loans due to a lack of new projects.
• REIT the new financing channel: Seazen has launched a private REIT backed by
Shanghai’s Qingpu Wuyue Plaza. It owns 34% of the REIT (consolidated) and has
raised Rmb400mn by disposing 66% of the mall (5-6% expected return, based on
rental income). It has raised Rmb420mn of bank loans and Rmb400mn of equity
funds from the Qingpu mall in total. Seazen will launch another private REIT
project this year, and it aims to launch a public REIT with a Rmb2bn issuance later
in 2026. It believes the REIT channel helps: (1) marginally improve liquidity; and
(2) improve debt structure (replace debt with equity) on the back of Rmb120bn of IP
assets.
4
Alvin Au AC
(852) 2800-8533
@
Asia Pacific Credit Research
12 June 2026 J P M O R G A N
Site visits in Shenzhen and Shanghai
Shenzhen
• Premium residential project: We visited Marivista (观潮), a high-end residential
project in Bao’an Xin’an Street near Qianhai that is co-developed by CR Land and
China Merchants Shekou. With pricing at Rmb140K-150K/sqm with a lump sum of
Rmb20mn-100mn, sales are robust and every new batch launched is sold out in a
few minutes, per the sales manager. Buyers are mainly Shenzhen locals (non-locals
are restricted by home purchase restrictions) aged 30-40 working in industries such
as tech, finance, AI/semiconductors, etc. These young elites have amassed wealth in
recent years, and some of the sales manager’s customers earn Rmb100mn per year.
Buyers pay a 15-20% downpayment, and most borrow mortgages at a ~3% cost.
• NWD K11 ECOAST: We visited New World’s K11 ECOAST shopping mall in
Nanshan, which opened in April 2025. Occupancy was decent, at 80-90% (no
disclosure on rents), but foot traffic was weak on Wednesday at lunch time. The
tenant mix was broad across EV (Tesla, Nio), F&B, game stores, bicycle rental
shops and artwork shops, and the seafront coffee shop was relatively popular. There
are new office buildings under construction nearby, which could be positive for foot
traffic in the future.
Shanghai
• Premium residential projects: We visited: (1) COLI’s Anlan Shanghai (安澜上海),
a high-end residential/commercial complex in Xuhui CBD district; and (2) Shui
On’s premium Riverville (翠湖滨江) villa project in Yangpu district. Both projects
price Rmb20mn to >Rmb100mn in lump sum per unit. Similar to Shenzhen, sales
are fast, and the two projects we visited are nearly fully sold. Buyers are mainly
Shanghai locals or from the nearby Yangtze River Delta, aged 30-40. There will be a
lot of new office supply in the Xuhui CBD district in the next few years. Besides the
commercial complex we visited, Hongkong Land will also complete the Westbund
Central project in that area by 2028E.
• IP: We visited Hang Lung’s Plaza 66, a high-end luxury mall in Jing’an district, and
Longfor’s Paradisewalk shopping mall in Minhang, Shanghai.
• Hang Lung Plaza 66 (恒隆广场): The mall enjoys unique positioning, with a high
concentration of luxury brands in the city center area. Tenant sales were strong, at
>10% yoy in 1Q26, driven partly by the promotion event of a major tenant in 1Q.
The sales manager noted that the national tax refund policy for tourist purchases is
supportive of foot traffic, but the impact on sales is limited. She also observed
increased visitors from Korea, Taiwan (which benefited from the AI boom) and the
Middle East.
• Longfor Minghang Paradisewalk (龙湖闵行天街): Foot traffic was decent on a
Thursday afternoon, and key tenants include fashion wear/sportswear (CK Jeans,
North Face), F&B and consumer electronics (., Xiaomi, Huawei). The sales
manager noted that the mall targets business, family and students as customers, and
sees Wanda as the key competitor in the region. She believes Wanda is more focused
on near-term profits, but the mall focuses on cultivating a decent shopping
experience with an optimal tenant mix.
xDu17Hy9NuOSWPbWkpC1mW+45Plzh7YVqWBfGjEWvJS/uDphZkNp9fLB4q0Y2Nff
5
Alvin Au AC
(852) 2800-8533
@
Asia Pacific Credit Research
12 June 2026 J P M O R G A N
Figure 1: Strong sell-through at Marivista (观潮) in Bao’an, Shenzhen
Source: . Morgan. Note: 已售 = sold.
Figure 2: Neighborhood and school network near Marivista (观潮) in Bao’an, Shenzhen
Source: . Morgan.
6
Alvin Au AC
(852) 2800-8533
@
Asia Pacific Credit Research
12 June 2026 J P M O R G A N
Figure 3: NWD’s K11 ECOAST shopping mall in Nanshan, Shenzhen
Source: . Morgan.
Figure 4: NWD’s K11 ECOAST shopping mall in Nanshan, Shenzhen
Source: . Morgan.
7
Alvin Au AC
(852) 2800-8533
@
Asia Pacific Credit Research
12 June 2026 J P M O R G A N
Figure 5: COLI’s Anlan Shanghai (left) and HKL’s Westbund Central project (right) in Xuhui,
Shanghai
Source: . Morgan.
Figure 6: Shui On’s Riverville villa project in Yangpu, Shanghai
Source: . Morgan.
8
Alvin Au AC
(852) 2800-8533
@
Asia Pacific Credit Research
12 June 2026 J P M O R G A N
Figure 7: Shui On’s Riverville villa project in Yangpu, Shanghai
Source: . Morgan.
Figure 8: Hang Lung Plaza 66 shopping mall in Jing’an, Shanghai
Source: . Morgan.
9
Alvin Au AC
(852) 2800-8533
@
Asia Pacific Credit Research
12 June 2026 J P M O R G A N
Figure 9: Longfor Paradisewalk shopping mall in Minhang, Shanghai
Source: . Morgan.
10
Alvin Au AC (852) 2800-8533
@
. Morgan Securities (Asia Pacific) Limited
Soo Chong Lim (852) 2800-7387
@
Asia Pacific Credit Research
China Property
12 June 2026
J P M O R G A N
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Important Disclosures
Market Maker/ Liquidity Provider: . Morgan is a market maker and/or liquidity provider in the financial instruments of/related to Shui
On Land or related entities.
Manager or Co-manager: . Morgan acted as manager or co-manager in a public offering of securities or financial instruments (as such
term is defined in Directive 2014/65/EU) of/for Shui On Land or related entities within the past 12 months.
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Shui On Land or related entities.
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Longfor Group - . Morgan Credit Opinion History
Date Action Rating/Designation Ticker/ISIN
Issuer 11 Jan 18 Upgrade Overweight LNGFOR
'27 * 21 Aug 23 Initiate Overweight XS2098539815
'32 21 Nov 24 Initiate Overweight XS2098650414
% '22 12 Sep 22 Terminate Not Covered XS1633950453
% '23 24 Feb 23 Terminate Not Covered XS1743535228
'29 21 Aug 23 Initiate Overweight XS2033262895
% '28 26 Mar 20 Upgrade Overweight XS1743535491
11
Alvin Au AC (852) 2800-8533
@
. Morgan Securities (Asia Pacific) Limited
Soo Chong Lim (852) 2800-7387
@
Asia Pacific Credit Research
12 June 2026
J P M O R G A N
% '23 11 Jan 18 Terminate Not Covered XS0877742105
% '19 17 Feb 17 Terminate Not Covered XS0844323930
% '16 29 Apr 15 Terminate Not Covered USG5635PAA78
Seazen Group Ltd - . Morgan Credit Opinion History
Date Action Rating/Designation Ticker/ISIN
Issuer 13 Sep 24 Terminate Not Covered FUTLAN
Issuer 13 Jul 25 Initiate Neutral FUTLAN
Issuer 24 Sep 25 Upgrade Overweight FUTLAN
Issuer 04 Dec 25 Downgrade Neutral FUTLAN
% '28 * 13 Jul 25 Initiate Neutral XS3099012406
% '28 * 24 Sep 25 Upgrade Overweight XS3099012406
% '28 * 04 Dec 25 Downgrade Neutral XS3099012406
% '18 16 Sep 16 Terminate Not Covered USG3701AAA46
% '19 29 Mar 17 Terminate Not Covered XS1086808570
% '26 13 Jul 25 Initiate Neutral XS2290806285
% '26 24 Sep 25 Upgrade Overweight XS2290806285
% '26 04 Dec 25 Downgrade Neutral XS2290806285
% '26 21 May 26 Terminate Not Covered XS2290806285
5% '20 07 Feb 20 Terminate Not Covered XS1565437057
6% '24 13 Sep 24 Terminate Not Covered XS2215175634
% '17 11 Jan 18 Terminate Not Covered XS1318304166
% '22 14 Sep 22 Terminate Not Covered XS2188034586
% '20 18 Nov 20 Terminate Not Covered XS1877986718
% '21 25 Feb 22 Terminate Not Covered XS1937623012
FTLNHD '27 24 Sep 25 Initiate Overweight XS3192214685
FTLNHD '27 04 Dec 25 Downgrade Neutral XS3192214685
Shui On Land - . Morgan Credit Opinion History
Date Action Rating/Designation Ticker/ISIN
Issuer 31 May 26 Initiate Overweight SHUION
% '29 * 31 May 26 Initiate Overweight XS3040578745
*Indicates representative/primary bond/instrument.
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12
Alvin Au AC (852) 2800-8533
@
. Morgan Securities (Asia Pacific) Limited
Soo Chong Lim (852) 2800-7387
@
Asia Pacific Credit Research
China Property
12 June 2026
J P M O R G A N
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13
Alvin Au AC (852) 2800-8533
@
. Morgan Securities (Asia Pacific) Limited
Soo Chong Lim (852) 2800-7387
@
Asia Pacific Credit Research
12 June 2026
J P M O R G A N
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