Chinese Developer Rally Fades After Vanke Support

The recent rally in Chinese developer stocks, sparked by state support for Vanke, appears to be losing steam as investors reassess the sustainability of the market's rebound. The initial surge in stocks following the Vanke announcement was driven by optimism surrounding government intervention and policy easing. However, as the market digests the news and focuses on fundamentals, the rally seems to be fading.



One of the key factors contributing to the initial rally was the direct state intervention in Vanke's financial challenges. The appointment of an official from Shenzhen Metro Group Co as the new chair, along with government plans to cover a funding gap and allocate special bonds, boosted investor confidence in the sector (Cheng, 2025). However, as investors scrutinize the underlying fundamentals of other developers, the market's enthusiasm appears to be waning.

Another factor driving the initial rally was the perceived effectiveness of recent policy measures aimed at stabilizing the property market. Lower mortgage rates and eased buying restrictions have helped to boost home sales and stabilize prices, although their impact on property investment and construction activity remains limited (Goldman Sachs, 2025). As investors focus on the broader challenges facing the sector, such as the persistent decline in second-hand home prices, the market's enthusiasm for the rally appears to be waning.

Moreover, the rally in Chinese equities has been driven by various factors, including retail investor participation and policy catalysts. However, the lack of significant changes in global fund managers' positioning suggests that the rally may not be entirely sustainable. According to EPFR data, active emerging market (EM) funds remain underweight China, despite slightly reducing their underweight position in recent months (Source: EPFR).



In conclusion, while the initial rally in Chinese developer stocks following the Vanke support announcement was driven by optimism surrounding government intervention and policy easing, the market's enthusiasm appears to be waning as investors reassess the sustainability of the rebound. As the market focuses on fundamentals and global fund managers remain underweight China, the rally may not be entirely sustainable. Investors should remain cautious and consider the underlying fundamentals and growth prospects of individual companies when making investment decisions.

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