Buy quality names on dip with decent growth but undemanding valuation。    After yesterday’s share price dip, the China property sector trades at 7.2x P/Eand 36% NAV discount, close to the historical average (7.0x P/E, 42% NAVdiscount). We attribute this to: 1) weekend policy plays an unexpected trigger;    2) profit taking after sector up 1.1x YTD and valuation close to +1S.D. ofhistorical average and 3) weakening industry sales growth outlook. After sectorre-rating (especially for mid/small-caps), we expect increasing divergenceamong developers. Share price correction may last a while. We suggestinvestors Buy quality names on dip (Vanke, Country Garden, KWG, Future Landand CIFI), which trade at undemanding valuation with strong earnings growth.。    Sector valuation normalized to historical average; 2017rally remains rational ifwe compare it to 2007and 2009。    We completed a proprietary study (page 2) on the previous bull market forChina property stocks in 2007and 2009. In comparison, the share price rally in2017remains rational (even the sector is up 1.1x YTD on average). If we look atthe peak valuation last week, forward P/E for 17developers was at 8.1x vs.2007’s 58x (7stocks) and 2009’s 18x (11stocks); P/B was at 1.5x vs. 2007’s5.6x and 2009’s 2.2x and NAV discount look reasonable at a 27% discount vs.2007’s 115% premium and 2009’s at par. So far, most of the stocks that haverallied have solid sales/earnings growth and reasonable NAV discounts. Afteryesterday’s share price dip, the current sector valuation returned to close tothe historical average: 7.2x P/E and a 35% discount to NAV (vs. 7.0x P/E and42% for the historical average).。

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