Xintiandi Lake, Shanghai China

Following a sharp but short-lived correction in February, the Chinese equity markets have jumped back to trade at record levels. Dalgliesh asserts that, in an effort to dampen speculation activity, the Chinese authorities are likely to impose additional tightening measures to cap the positive wealth effects coming from the buoyant property and equity markets.

He commented: "The sharp market downturn in February was sparked by the Chinese Central Bank reiterating its determination to contain GDP growth to around 8 per cent, but markets have since rallied with GDP growth at 11.1 per cent in the first quarter.

“With most property developers trading at a premium to net asset value, this has left investors feeling nervous about the sustainability of listed property counters in the face of potential further tightening. However, investors should not run for cover because although on the surface the outlook for Chinese property stocks looks uncertain, if you dig beneath, there is clear evidence to suggest that property developers' revenue flow is not under pressure."

With regards to property investment in China, the proportion of owner-occupiers remains high at around 90 per cent, while around 30 per cent of properties are purchased with cash – although this is showing signs of gradual change. In addition, the strength of pre-selling activity remains high, helping to reduce the property developers risk profile.

Dalgliesh continues: "We have also seen a number of high profile developers, such as Shimao and China Resources Land, issuing stock in order to facilitate further land bank acquisitions, indicating that despite the equity market's fears of further tightening risks, companies are seeing sufficient opportunities to ignore these.”