Country Garden (HK: 2007) (OTCPK: CTRYY) is not a bellwether stock for the Chinese property market. There are other, larger, companies that perform that function as the measure of the sector. But Country Garden is at least an indication of sentiment toward the sector. This is how we should be looking at the 11.7% jump today. Yes, obviously, it's in this particular instrument, this particular company. But it's both a result of and a guide to investor sentiment about the sector.
Country Garden is an investment holding company but it's primarily engaged in the sale of properties. There's a property development segment, construction, fitting out, management and hotel sections for example. So, this is not entirely dependent upon the retail development of domestic housing. But obviously heavily influenced by the overall status of the property market within China. That market that we've all had considerable worries about these past few years.
Country Garden stock price from Hong Kong Stock Exchange
Those past worries have been extensive of course. There has been a massive boom and that leads investors to think that what goes up must, inevitably, come down. Certain of the development companies have indeed got into considerable financial difficulty. But it's also true that China's economy just carries on growing at boom rates. This should mean the property market continues to grow. So, are those difficulties in other companies just because of other companies or because of the sector itself? That's the grand question.
Back a year Country Garden beefed up its capital position with a rights issue. That ability to raise capital is - when the rest of the market is swooning at least - a positive sign even if it hit the share price. The Mainland property companies rose strongly over the weekend, meaning that the HK quoted ones operating there were always likely to rise. We should probably take the Country Gardens rise today as being a matter of sectoral influence rather than corporate specific. It's a general change in sentiment about the sector that is.
