A House of Straw?

By Bill Alpert with assistance from Nizar Manek
Hong Kong’s home-builder stocks have begun to rebound. But what happens when the music stops?
As China’s economy has boomed in the past two decades, its citizens have moved into better digs by the millions. And by the thousands, residential real-estate developers have rushed to build apartments and homes for the country’s swelling middle class. Although most of China’s publicly-held builders trade on the Shanghai Stock Exchange, some of the mainland’s largest chose to list their shares in Hong Kong. That’s where overseas investors bet on whether China’s residential market will keep growing or fall apart the way those of Thailand, Spain, and the U.S. have.
Shares of China’s Hong Kong-listed home builders cooled significantly in late 2011, but the stocks have turned up again in the past couple of months as companies released better-than-expected monthly sales numbers. Reflecting the improved sentiment, a Deutsche Bank report on June 13 said the industry’s fundamentals were the best in three years.
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