Near-Term Weakness May Persist on Heightened Policy Risk Concerns, Albeit Selldown May Be Overdone

The severe policies targeted at the China K-12 education sector look to have led to the wide-spread risk-off across equities with China exposure. Despite a stable fee income business operating with favorable policies, the property management sector was also not spared as the sector is trading on rich multiples, especially considering the pandemic environment with investors crowded in quality large scale operators. We believe the draconian measures in the education sector are driving concerns whether the China property sector, which is already under policy overhang, may see further tightening, and whether there would be further shift in policy tone for the property management sector.